Mortgage life insurance labelled “junk product”

by Jamie Henry08 Dec 2014
One of the country’s leading financial journalists is saying what many advisors have long believed about mortgage life insurance.

Rob Carrick, of the Globe and Mail, has labelled mortgage life insurance “a junk product.”

Mortgage life insurance was in the news this summer after Stoney Creek resident, Christopher Massa’s death. Massa’s mortgage and mortgage life insurance was with Scotiabank when he was diagnosed with lung cancer. After his death, the bank denied the claim on his $289,000 mortgage “because he was not eligible for insurance coverage based on his health condition.”

“Banks are hyperaggressive in selling this junk product, and some mortgage brokers are getting into the act,” Carrick writes.

Carrick thinks the situation the Massa family faced can be avoided. “Buying insurance to pay off your mortgage if you die is a great thing to do for your family. Just buy it from an insurance company with competitive rates on term life policies. The coverage will most likely be cheaper than a bank-sold policy, and you pick the beneficiary. If you buy coverage from a bank, it gets the money should you die unexpectedly and your family has no say in how it’s used.”


  • by Kevin O'Brien CFP, CDFA 2014-12-16 4:11:24 PM

    Important point
    Many Canadians are carrying mortgage debt beyond their working years or are converting consumer debt to Lines of Credit. It's important to note that life insurance coverage is needed to cover these debt. When shopping for insurance to cover a mortgage, remember the insurance need may extend beyond the term of the mortgage. Many companies offer 20 year, 30 year and lifetime term insurance coverage.

  • by C. Edwin Chung CFP 2015-01-11 2:58:11 PM

    As a Certified Financial Planner, I tell people that the need for insurance never dies! When we are young life insurance is least expensive, but to many wait until they marry or buy a home before they realize the need for life insurance. Now the cost is much higher than if it was purchased before needed. Looking at life's necessities, life insurance is one of them and when bought early it can often be used as collateral. Once your house is paid for, you might have some other debt that needs to be addressed (capital gains/taxes) where insurance will be of benefit!

  • by DWayne 2015-01-15 12:59:50 PM

    You do not need insurance all your life, you only needed it while you have debt/dependents! Get Term, stay away from Cash Value-Permanent Insurance (Whole Life, Universal Life, Term to 100) as those products only benefit the agent as they get 8-10 times the commission then providing term for their clients. Get term, and the money you save invest! Would you rather have insurance or a big chunk of cash?