Women Are Being Overcharged For Mortgage Insurance

Welcome to my new series on Life Insurance For Women. In the introduction, I mentioned the reasons why women need insurance and how it empowers you. Mortgage insurance comes up when applying for a mortgage.

I am going to interview Chad  from GoLife insurance   https://golife.ca/fourcolumns on the following four topics:

1. Women are being overcharged, a lot, for mortgage insurance – what you need to know!
2. Why women talk themselves out of the life insurance they want/need?
3. How to prepare for baby- 3 pieces to financial protection (will, mat leave savings, life insurance).
4. Is underwriting for women different?

What is mortgage insurance?

When you apply and get a mortgage, the bank or lender will ask if you would like to have your mortgage paid off if you die. Given your home is often the largest “investment” you’ll make, people say “Yes”.  It is understandable that no one wants to leave their family with that type of debt. What people are not told is that they are buying creditor insurance and not a life insurance policy, and the differences are big for those wanting to get the best life insurance policy for their mortgage.

Can you highlight 3 differences between mortgage insurance/creditor insurance and a personal term life insurance policy?

Control: The beneficiary of the mortgage insurance is the bank, not your family. With a personally owned policy, your family gets the money and they can decide what the best financial decision is. You don’t own mortgage insurance meaning if you move or have a health change your coverage may not be renewed or be in place. You are the owner of a term life insurance policy and it goes where you go.

Underwriting: With mortgage insurance, you don’t even know if you are covered. It’s only after you die that mortgage insurance looks into your medical history, called post-claim underwriting. A good life insurance policy completes all the underwriting upfront, giving you confidence that your protection is actually in place.

Cost: Mortgage insurance costs more, especially for women. Women often pay double, or more, for mortgage insurance compared to a personally owned term insurance policy.

Why are women being overcharged so much?

In most cases, women are being charged excessive of 100% or more. Mortgage (creditor) insurance pricing does not distinguish between men and women, so everyone is lumped in together. Both men and women are paying too much but women even more so.  Here is an example:

• 37-year-old women (non-smoker)
• $500,000 mortgage
• $46 per month (major Canadian bank mortgage insurance rate)
• $19 per month (10-year term life insurance policy, from Go Life’s site)

That’s 142% more than she should be, for an inferior product. Basically, women are subsidizing men’s mortality rates and older mortgage holders. A term life insurance policy is a better and cheaper choice for women when compared to creditor insurance.

There is a history of women being treated unfairly by lenders, can you explain?

There was a time when banks and lenders would only lend money based on the man or husband’s income, even if the woman or wife was working. Then over the decade’s lenders began lending higher amounts based on a women’s income and finally in the 1970s lenders started giving equal weight to a women’s income. It’s tough for many women to connect with the life insurance industry because historically the industry has focused on the man being the primary income earner. That, of course, is outdated and the industry has been slow to adapt, one reason is the average age of an insurance agent today is 60 and mainly male.

If you have mortgage insurance at the bank, can you switch?

Yes, there is no cost to canceling mortgage insurance with the bank. You can cancel mortgage insurance at any time, you don’t have to wait till your mortgage renewal. Here are the 3 steps to change your coverage:

1. Apply for a personal term life insurance policy
2. Receive your approved personal policy
3. Contact the bank and ask them to cancel your mortgage life insurance.

It’s important to note that having mortgage coverage with your lender/bank is not a requirement for getting a mortgage. Mortgage insurance can sometimes be confused with CMHC, mortgage default insurance, which is required when you buy a house unless you have a down payment of at least 20%.

What happens to mortgage insurance in the case of divorce?

When building a financial plan or buying financial products I recommend choosing options that give you the most control. You own and control a personal life insurance policy; it belongs to you. If you have mortgage insurance at the bank and you have to move or sell the house, your coverage does not go with you. Also remember, the bank is the beneficiary but with a personal policy you decide who the beneficiary is and can change it to your children, other family member or a new relationship.

Why aren’t more women buying personally owned policies to cover their mortgage?

For most purchases, the better option is usually not the cheapest. It’s human nature to question or wonder “what’s the catch?” In the case of mortgage insurance, there is no catch and that surprises a lot of people. You pay less and get a better term life insurance product with more flexibility.

How do you buy a personally owned term life insurance policy to cover your mortgage?

Unfortunately, when it comes to accessing quality life insurance advice there is a wide range of experience. Want the best life insurance advice, look for professional designations like CFP (certified financial planner), and ensure a needs analysis of your situation is completed.

Here are three ways you can apply for a term life insurance policy:

1. Contact a life insurance agent
2. Ask for a referral from your financial planner (they may be a licensed advisor)
3. Purchase online (it’s safe through Go Life)

Are there other articles you would suggest if someone was looking for more information?

Here are 3 articles that your readers may find of value:

• Banks overcharge…they know they own the market
• 7 reasons you should say no to mortgage insurance
• 5 reasons why mortgage insurance is a rip off

Photo Credits: Evan Dvorkin Evelyn Mostrom  NeONBRAND  Daniil Lobachev  Kelly Sikkema  CoinView App Toa Heftiba

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