by Glenn Cooke
Welcome to our channel on mortgage insurance. My name is Glenn Cooke and I’m with Only Insurance. This video is the second in our series on mortgage insurance.
Today we’re going to look at mortgage critical illness insurance vs term critical illness insurance. Over the next 4 minutes we’re going to do a deep dive into the various differences between these two insurance policies.
First, lets start with a basic definition. Mortgage critical illness insurance offered by the banks is a type of group creditor protection. The group part means that the policy is actually owned by the bank not the consumer. The creditor protection part means that the insurance is tied to a debt, in this case your mortgage.
Term critical illness insurance is an individual life insurance policy offered directly to consumers by life insurance companies. You are the policy owner so you have control over the policy. The term part of term critical illness insurance means that the premiums are level for a specific period of time. In the case of the critical illness offered at mortgageinsurance.ca the term is 10 years.
With the definitions done with, we’re going to look at the three primary differences between mortgage critical illness insurance and term crtiical illness insurance – price, benefits, and claims payment.
Let’s look at price first. That’s an easy comparison, it’s just numbers. It turns out that premiums for both types of coverage are remarkably similiar. For a male age 46, $100,000 of critical illness coverage, prices for an individual policy are around $75/month. Mortgage critical illness insurance from the banks range in price from $68 to $72/month. So in that head to head comparison, prices are relatively similiar – within about 10%. All other things being equal we would suggest the least expensive. But in this case, not all things are equal.
Which leads us to our second comparison – benefits. When it comes to benefits, mortgage critical illness is absolutely deficient when compared to an individual term critical illness policy.
Mortgage critical illness insurance covers you for three conditions: Heart attack, cancer, and stroke.
By contrast, an individual term critical illness policy as offered at mortgageinsurance.ca covers you for 25 conditions – and at about the same price as the bank insurance. I’ll read these conditions quickly so you get a sense of the coverage:
Alzheimer's disease, Aplastic anemia, Aortic surgery, Bacterial meningitis, Benign brain tumour,
Blindness, Coma, Coronary artery bypass surgery, Deafness, Heart valve replacement, Kidney failure,
Loss of independent existence, Loss of limbs, Loss of speech, Major organ failure on waiting list,
Major organ transplant, Motor neuron disease, Multiple sclerosis, Occupational HIV, Paralysis, Parkinson's disease, and Severe burns.
But that’s not the end of it. Term critical illness insurance provides even more coverage – a smaller benefit called ‘early intervention benefit’. This benefit covers some of the less severe cancers, for a smaller benefit amount – in the case of the policies offered at mortgageinsurance.ca it covers you for 10% of the primary coverage amount, to a maximum of $5000. This coverage is paid out for angioplasty, ductal carcinoma in situ of the breast, early prostate cancer, and superficial malignant melanoma.
On a personal note, I purchased a term critical illness policy on my kids when they were younger. At the age of 23 my daughter had a brush with superficial malignant melanoma. Her policy paid out a benefit under the early intervention benefit. No such benefit would’ve been paid with a mortgage critical illness policy.
Next, lets look at the beneficiaries. With bank critical illness insurance, your beneficiary is the bank, and is used to pay off your mortgage. With an individual policy, the benefits are paid to you, for use however you see fit. That could be on drug costs or replacing income when you’re off work.
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Lastly, lets look at claims payment – what happens when you develop a critical illness. In this comparison we don’t actually have access to published numbers so we’re going to use common sense and our experience. Nevertheless, what I’m about to tell you has been documented by authorities such as CBC Marketplace.
Mortgage insurance uses what’s called post claim underwriting. That means that when you purchase the insurance, no underwriter actually looks at your application. It just gets filed and you start paying premiums. They don’t pull the application to review it and decide if the coverage is valid until after you develop the critical illness. This is a huge cost saving measure because instead of reviewing everyone’s applications, they only review those of the people who develop a critical illness and make a claim.
Now, in a perfect world that wouldn’t make a difference. But if you’re answering these medical questions with the assistance of your local bank staff, there’s a pretty good chance that you could screw up. And when do we find out that you screwed up? After you develop a critical illness and the insurance company looks at your application and pulls a doctors report – that’s the post-claims part. At that point it’s too late for much in the way of recourse.
With term critical illness insurance, you’ll do a medical history interview with a trained person from a paramedical company over the phone. Next, an experienced underwriter will review all the documentation and your history before the policy is issued. If there’s a mistake, they should find it and be able to clarify it before they even issue the policy.
The end result of that is that mortgage insurance policies have a much higher probability of denying claims that a term critical illness insurance policy.
So there you have it – term critical illness insurance wins hands down over mortgage critical illness insurance. It’s got similar premiums, far better coverage and benefits, and is more likely to actually pay out.
If you’d like to look at term life and critical illness insurance to cover your mortgage, visit mortgageinsurance.ca. There you can compare prices for different policies, and actually apply right online through the website. You can go there now by clicking on the mortgageinsurance.ca logo at the bottom of this video.
Thanks for watching, and we’ll see you next time.