This topic that is near and dear to my heart, and you’ve probably heard it before from me. The whole topic of mortgage insurance (also known as creditor protection) is something that protects your lender, not you or your family.
There are many reasons why mortgage insurance isn’t there to protect you.
First off – if something does happen, the insurance you’ve been paying for doesn’t go to your loved ones, it goes directly to the lender to cover off your mortgage or debt. What if your family needed it for something else?
Second, it’s only there to cover off your debt. What about your final expenses, time off work for your significant other to grieve, or helping your kids with their education? How will those things be paid for with only your significant other around?
Third, mortgage insurance has a declining balance. This means that with each payment you make to pay down your debt, your mortgage amount decreases (but your premium doesn’t go down with it!)
Confused on any of these? Here is a flyer from Manulife Financial that might make it a bit clearer. Find it by clicking here.
Lastly there are the horror stories due to the limited underwriting that is done BEFORE any claim. This is well illustrated in this video: http://www.youtube.com/watch?v=qe61HVGIwUo Take a watch through the video and see if you still want this type of “insurance.” It’s a short 20 min documentary done a few years ago by CBC Marketplace and it’s worth the watch.
If you come across anyone with this time of mortgage insurance (or creditor insurance) I need to talk to them ASAP.
Travis
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