Good Money After Bad

It's a dry and boring topic.  Thanks to an enlightened piece by the CBC's Marketplace some people were tipped off that the mortgage insurance they have with their bank may not end up paying off should you need it.  Now as soon as words like insurance come up a lot of people tune you out and think the whole thing's a rip-off and they lose interest in the conversation.  However, when it comes to the banks selling mortgage insurance, there is a big problem and people need to know if they're not covered.  I have now had personal experience with this and despite not being an expert on it, I think I can put the problem into plain terms that even I can understand.  Anyone who has mortgage insurance with a big bank needs to know and understand this.  If you know someone who has mortgage insurance, you need to direct them to find out more because when a spouse dies and suddenly they find out the mortgage isn't going to be paid off, at that point it's too late for everyone.  The simple facts are this.  Alberta is the only province that has a law in place saying that anyone selling any kind of insurance has to be licensed.  Everywhere else in the country, you are on your own to figure it out.  Anyone at th bank can sell insurance even if they don't understand it.  The details of this are pretty straight forward.  You take out a mortgage with the bank and the bank asks if you want mortgage insurance.  If you or your spouse should die the mortgage will be paid off and your family won't be thrown from the house.  Most people jump at the chance to have this protection and the banks are making a fortune off it.  The first problem is the bank is actually just selling you the chance at insurance.  You are not actually insured until a person dies and then they go to the insurance company to see if they'll cover it.  You may have paid for years only to find out that your claim is being rejected and you aren't covered.  It seems the biggest reason that people aren't covered is, they committed fraud.  When you take out mortgage insurance you fill out a quick little form.  Unlike buying actual life insurance that has a form as thick as War and Peace.  There's a reason for the difference.  Again, they aren't actually qualifying you for insurance at the bank, they're just agreeing to take your money and if you die, then they'll see if you qualify.  Now I can hear the big question, but how did I commit fraud?  Well it was completely innocent on your part.  The question on the form that we signed said simply "in the last 24 months have you been screened or tested for cancer, high blood pressure....." and then it went on to list a bunch of other potential illnesses and defects.  You stop for a moment, think about it and check the "no" box.  The bank says great and you go on your merry way paying them money to insure your mortgage.  Suddenly, out of nowhere you die.  The bank goes to the insurance company and the insurance company looks at your medical records.  Then they find that in that 24 month period you maybe had a pap smear.  A very common test many women have had many times.  It turns out that's considered a "cancer test".  You had checked no and now you've committed fraud.  Sorry, no money for you.  If you've had a blood pressure test, even a routine one as part of a check up, that's considered a test for high blood pressure.  Oops, sorry, you committed fraud, could you please be out of your house by Friday.  Just about the only way you can be absolutely sure that you have not committed fraud is if you had not been to a doctor or a hospital in the 24 months prior to signing up for mortgage insurance.  If you had been to a doctor, than, in more cases than not, you are not covered by the mortgage insurance that you continue to pay for right now and will continue to pay for if you don't do something about it.  You must investigate this.  Your friends must investigate this.  We went as far as to call the insurance arm of the bank we deal with and they brushed it off.  They said, oh ya we heard about that Marketplace report but you're fine as long as you didn't answer any questions on that form fraudulently.  We thought we were in the clear but then we dug just a little deeper and it turns out we weren't covered.  Seven years of paying mortgage insurance and it's all been a waste because I had been to the doctor and he'd used the cuff thing on my arm to take my blood pressure.  I had checked "no" on the little form but I had received a high blood pressure test.  The bank didn't ask me about it, the form didn't clearly state that this was a problem.  However I had committed fraud and if I died the banks' insurance company had every right to deny the claim and my family would be on their own with mortgage payments still in tow.  This is a scam.  The lack of information provided to you by the bank constitutes a fraud as far as I'm concerned but the courts would side with them.  The only way to solve this problem is to force the government to bring in a law similar to Alberta's.  Insurance should only be sold by licensed individuals who understand what they're selling and explain it to you.  Literally billions of dollars are spent every year on mortgage insurance with the banks and millions of Canadians are not covered.  The story of denied claims doesn't get more play only because the great majority of us never have to make a claim, we're the lucky ones.  Just think of losing your partner and then finding out that your mortgage insurance is denied.  That is what you potentially face if you don't act today and make sure that you did not answer that form in a fraudulent manner.  You can get life insurance from a licensed broker to cover your mortgage for around the same amount of money as you now pay the bank and you will be pre-cleared so there is no doubt.  Tell everyone you can.  We have to look out for each other on this one because, surprise, surprise, the bank isn't interested in looking out for us. Until We Type Again, Take It Ease !