How to get an insurance that actually protects you

Today’s article content was provided by Michael Bronstine of GBK  Strategic Financial Partners. Their website is here.

“If you have a mortgage on your home, chances are good you also have mortgage insurance. The idea is that if you should become seriously ill or die before paying off the mortgage, the coverage will kick in and pay it off for you. It’s meant to offer peace of mind and to reassure you that your family will be able to stay in your home if anything should happen to you.

The reality falls a little short of that. In this week’s Marketplace investigation, we meet two families who bought the coverage and thought they were protected, only to have their claims denied when they became sick or died. In each case, the insurer said the applicant person had lied on their initial application form.

It turns out a routine test at the doctor could be reason to deny your claim, if you don’t mention it. Had a cuff inflated on your bicep? That counts as being tested for high blood pressure.

As Erica Johnson reports, the bank staffers selling mortgage insurance are not licensed and rarely trained to explain the details and legalities of those insurance products. The result is people who pay premiums and think they are covered, only to realize later that they are not.

How to buy insurance that really will protect you

Be sure you qualify.

  • There are many terms and exclusions associated with credit insurance policies. Learn what they mean and how they apply to you.
  • Call the insurance company directly (NOT the bank that sold you the coverage) for clarification about pre-existing medical conditions.
  • Call your doctor to clarify details of any pre-existing medical conditions you may be concerned about.

Know that you can get out.

  • You usually have 10-30 days to review your policy after the initial purchase (this is known as a “cool-down” or “free look” period).
  • If you have already purchased your credit insurance you can cancel anytime. Keep in mind, however, that you may lose premiums already paid.

Shop around.

  • Consider buying from a licensed insurance broker who will explore any medical issues upfront.
  • Consider buying or topping up an individual life insurance policy to cover your mortgage.

Know your coverage.

  • You may already have adequate insurance coverage through your work or other policies. Insurance experts say it’s better to buy one traditional insurance policy than purchase a number of small policies for a variety of products.

Be sure you need it.

  • The purpose of credit life mortgage insurance is to protect your loved ones from making mortgage payments if something were to happen to you. This type of insurance may not be applicable if you do not have any dependents who would need to keep your home if something happened.”
Bank’s mortgage Life InsuranceIndividual Life Insurance
No discounts on premiums for healthy people.Discounts on your premium, if you are a healthy person with a healthy family history. (Very significant savings for older people)
The older you are, the more expensive premiums are. (in comparison to an individual policy)Over 20 companies competing for your business. Get the best rates available based on your health situation.
Group Policy- No Control.You are in Complete Control.
Policy may be cancelled by the bank.Policy can only be cancelled by YOU.
Non-convertibleFully-convertible (Life portion)
Premiums NOT-GuaranteedPremiums are  FULLY-Guaranteed on most plans.
VOID if mortgage in default.Insured even if mortgage is in default.
LAPSES if property is sold or if you move your mortgage to another bank.Your insurance moves with you.
NOT guaranteed renewable at mortgage renewal date.Automatically renewable to age 85.

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