mortgage life insurance-cancel?

[secheltsaver]

When we bought our house,we were "strongly encouraged" to purchase a joint mortgage life /disability insurance through our bank.I was refused disability coverage,and our joint life rate was influenced by my age.Premiums have gone up recently (now $132.59/mo) and we'd like to just cancel the damn thing.
We're CMHC insured and I have disability insurance and a modest life insurance policy through work.My daughter could very easily get life/disability coverage for much less than we're paying(under 30,non-smoker,healthy as a horse).Either of us could carry the mortgage and expenses alone if the other died suddenly(we have a 3rd. relative who also contributes,but is not on title).In fact, we owe less than the land alone is worth so it could be sold for redevelopment if there were (highly unlikely)financial problems.
Would cancelling this insurance policy affect our upcoming (May 2013) renewal?We went into this as new borrowers,but feel we are now in a much more marketable postion d/t our history of double/extra payments over the last 4 years.The original amortization of 480 months is now reduced to 217,and will continue to drop at a similar rate over the next 10 months.

[scrapbookingoasis]

not sure if it would affect upcoming renewal - I would guess they would just try to sell it to you again.

We cancelled ours. We had increased our life insurance policy to cover the mortgage. Also I had read (Gail Vaz-Oxlade is one of the financial guru's who says get rid of it) that it's not worth it and to get rid of it!

[marstec]

If it's a CMHC-backed mortgage, I'm not sure whether you have the option to drop the insurance. Perhaps when the equity falls to within a certain range? Not sure. I guess it's like all insurance products, it seems like a huge waste of money, until you actually need it.

[scrapbookingoasis]

I guess it's like all insurance products, it seems like a huge waste of money, until you actually need it.

it's hard to get money from them though - personal experience

I should add - our mortgage which we dropped the ins is NOT a CMHC backed mortgage so I also am not sure if you can drop it with that.

[DianneS]

Bank mortgage insurance is the worst buy around. You would be much better off with an insurance policy you own personally and the rates would likely be lower. If you would like to understand how bank mortgage insurance works, take a look at this link:

http://www.cbc.ca/marketplace/2008/02/06/in_denial/

Click on the "watch video" button in the photograph. You will quickly understand why you should own your own life insurance policy rather than having a policy owned by the bank. It is very sad to know that if the people in the video had applied for their own traditional term insurance policy where all the medical questions are asked before the policy was issued the outcome would have been very different for their families. It really is heartbreaking....

[Diane de Poitiers]

Having mortgage life insurance is not a CMHC requirement.

[Carlotta]

Cancel it and buy a simple term policy. Mortgage insurance is underwritten after death, term insurance is underwritten at the time you purchase your policy. Watch the CBC Marketplace episode listed above by Dianne S... ..
With mortgage insurance (or creditor insurance), the amount of coverage you have decreases each time you make a payment, but the price remains the same. Wit term insurance, the cost remains the same for the term, and the amount you are covered for also remains the same. You also have more flexibility.... if you die with creditor insurance, the bank gets paid and that's it. If you die with term insurance, your beneficiaries can use the money to pay off the mortgage, pay off other debts, or invest the money and use the interest earned to make the mortgage payments.
The most important part though is the underwriting. You could be paying for insurance that would never pay out if you died.

As far as whether or not insurance is necessary.... no one ever thinks it's needed.... until they need it. So you're better to get it while you are young and healthy. If you wait until you NEED it, it will be too late as you will be uninsurable.

[MortgageQueen]

Good thread.
You do not have to have insurance if you have a CMHC insured mortgage. CMHC is there to prrotect the Lender. . .no one else.
I agree you should have a proper life insurance policy.
Problem is, we are required BY LAW to offer it. It is stressed over and over to us if a client dies without insurance and you didn't lay out all the possibilities, we could be partially responsible (morally) for wrecking their lives. That said, yes. . there is a commision on insurance, but it's pretty tiny.
I think the reason brokers/bankers are required by law to offer it, is because people just never get around to getting insured. It may not be the best value, but it's saved many a family home.
Underwriting IS very important. I will tell you, after being at insurance seminars, you have to be very, very careful about reading the fine print. Do you know that one insurer actually has a question, "Have you "ever" been to a doctor?" REALLY?. . .! There's some pretty whacked out stuff out there. One guy got disqualified because he went to a PET psychologist and didn't reveal that on his insurance form. . .ya. . .not kidding. . .

[DianneS]

It is unfortunate that mortgage insurance 'has to be sold' by unlicensed bank staff and mortgage brokers. The questions on those types of creditor insurance applications can be very vague and confusing.

When one applies for a traditional term insurance policy through a licensed insurance advisor the questions are usually much more specific. I always tell clients that honesty and disclosure are crucial when answering the questions on the application. A very high percentage of people are approved at standard rates. When a client receives their insurance contract, they can be confident that they are fully covered because they were honest and forthcoming when the completed the application. An insurance company does not disqualify clients out of hand if they have been to see a psychologist....what they care about is whether one's anxiety, depression or whatever, has been treated; that they are/have been symptom free for a given period of time; and that if medication has been prescribed that it is being taken and is effective. In other words, give the insurance company the information they need in order to make a decision to approve you. A good insurance advisor will work through the process with you to ensure your application is complete and accurate. S/he will also advocate for you with the insurer....

[MortgageQueen]

I quite agree DianneS. But I bet you know how many uninsured people are out there when they darn well should be insured for the sake of their families. If we want the Gov't to stop babysitting us "for our own good" then we have to pick up our socks and take care of business.

A financial advisor will tell you insurance is the 1st thing you should have and there's tons of options.

My company offers a "no questions asked" policy so that we can cover everyone for a great price BUT if you are in reasonable health, you're way better off to get a life policy.
I encourage disability too where there is insufficient income to cover expenses should one of the mates become sick. Even a little bit helps.

[tjthemanto]

No it won't affect your renewal , although the bank employees might tell you otherwise.

Its a huge cash cow for them and they make big commissions on it. CMHC insurance and mortgage life insurance are two totally different things and are independent of each other.

Lot of bank employees lie and force you to take their mortgage life insurance as a condition for approving your mortgage, either directly or indirectly they will imply that it will affect your mtg rates or your mtg amt, both of which is untrue.

Mtg life insurance is a pretty bad deal for you but a great deal for the bank. see link below. There are much better and cheaper alternatives available than tht if you really want to insure yourself.

http://www.thestar.com/yourhome/mone...ge-life-policy


http://touch.canadiancapitalist.com/...6b3cb11a000090

[tobiwobi]

Since you said "The original amortization of 480 months is now reduced to 217"... not sure what that means in terms of equity you may have in your home at this point - you may not have to pay for CMHC insurance when you renew if you have 20% equity in your home. CHMC is only protecting the lender in case you default, and must be paid up by you if you have less than 20% downpayment/equity.

Also do NOT just sign the renewal papers when they send it. Look around to see what's available, we even have a member here who is a broker! You've been good, you've been paying extra for 4 years, mortgage competition is cut throat among banks right now, your bank does not want to lose those tens of thousands in interest that you're paying them, and their renewal deal is not the best they can do. Don't wait till you get those renewal papers either, cos they send them kinda late, start making appointments and seeing what other banks can do months before your mortgage is up for renewal.

[DianneS]

I quite agree DianneS. But I bet you know how many uninsured people are out there when they darn well should be insured for the sake of their families. If we want the Gov't to stop babysitting us "for our own good" then we have to pick up our socks and take care of business.

A financial advisor will tell you insurance is the 1st thing you should have and there's tons of options.

My company offers a "no questions asked" policy so that we can cover everyone for a great price BUT if you are in reasonable health, you're way better off to get a life policy.
I encourage disability too where there is insufficient income to cover expenses should one of the mates become sick. Even a little bit helps.

Agreed that many people are not insured, when they need to be for those they love, or under-insured. My point, though, about "no questions asked" insurance is that the questions are ALWAYS asked before any claim is paid. If they are not asked at the time of application, they are asked at the time of death. Given that I want to know, every month when I am making my payment, that I actually have been approved and that my insurance is truly in force, 'no questions asked' insurance is not a risk I would be willing to take. Anyone who goes through underwriting and is declined for a traditional term life insurance policy will face the same process at death....but their families likely will find out the claim will not pay despite the fact they have been paying premiums for years.

I agree that disability (and critical illness) insurance are very important, too. There is a higher likelihood that we will be disabled or suffer a major illness, and survive, than that we will die prematurely. When we die prematurely, leaving family and debts behind, it is generally more devastating financially for our loved ones so people do choose life insurance as a first priority. I agree that is very important not to forget the other coverages, though. Not being able to work and having a family to feed can be a catastrophe for a family, particularly if they do not have group coverage through their employer.

A quote I heard from an old insurance advisor: "There are two reasons people by life insurance -- because they love someone or they owe someone". Folks, if either applies to you, do your family and yourself a big favour and talk to an independent advisor who can help you have the peace of mind that if something should happen to you, that although those you love will be emotionally devastated, they will not also have to cope with being financially devastated.

(Stepping down off my soap box now...)

[Carlotta]

I agree completely with Dianne S. "No question asked" insurance is the absolute WORST type of insurance to buy. They may not ask the questions when you apply, but they will sure as heck go through ALL of your medical records when you die and get the answers then. If you are not healthy enough to qualify for a term policy, there is absolutely no point in buying "no questions asked" insurance because there is no way it would pay out in the event of your death... you would just be throwing your money out the window.

[MortgageQueen]

Hmmmm. Well, I can certainly totally understand your feelings. The product our company offers though, doesn't pretend they're going to pay "no matter what". They say up front, they will NOT cover a pre-existing condition. They also say up front, the underwriting WILL be at time of death, but only goes back 1 year. Is it perfect? No. But pretty straight forward and they DO pay out. It's better for people who DO have medical conditions, because just because you have diabetes doesn't mean you might not die in a car crash, right? That's pretty hard to argue. BUT many people with these conditions can't get ANY coverage.
It's all a matter of perspective.

I'm not interested in selling insurance, but if I think that the client is going to walk away and not GET any insurance? Yes, I will push a little. . .but just a little. I'm not their mother, but I still feel concerned. . .