Creditor (Mortgage) Insurance

Creditor insurance is a terrible insurance product for many reasons. To name a few:

Cost: it is typically 30-40% more expensive than a private term life insurance policy.

Many claims are denied: Creditor actually underwritten at time of claim often leading to the lenders insurer finding a reason or technicality to deny the claim. In contrast, less than 1 in 500 private claims are denied (source Manulife).

The bank, if the coverage pays, is the beneficiary of the policy – not the family.

If you change banks you may have to re-qualify at the new financial institution – what if your health has changed and you can’t get coverage? Remember, life insurance is a privilege not a right.

The coverage is ‘decreasing term’. This means that every time you make a payment that the death benefit decreases but the premium does not.