Be aware…
Canadian Banks have been fighting for years to find their way into the lucrative insurance business and have tried and found several back doors. One of the products they are allowed to sell is creditor insurance, which includes mortgage and loan insurance. The problem is that these products are very misleading marketed and leave some consumers stranded.
What is Post-Claim Underwriting?
Well, it’s a big problem. A company engaged in post-claim underwriting doesn’t attempt to recognize the risk posed by an applicant before agreeing to insure them. Rather, the company simply issues a policy with little to no investigation or inquiry into the client. This allows the insurance company to immediately collect profits on the premium paid by the applicant. They will continue collecting these profits, having expended very little effort, until a claim is eventually filed for by the insured. It is at this point (post claim) that the insurance company will launch an all-out investigation, searching for any reason to deny the claim. In other words, after you died, the company will see if you actually qualify for the policy. This is how post-claim underwriting works to prevent deserving, paid-in clients from reaping the benefits they have been paying into.
This video from a CBC Marketplace investigation is 10 years old but unfortunately still relevant and explains it very well.
How do I Protect Myself Against Post-Claim Underwriting?
It is important to remember that Banks and Insurance Companies are businesses, and just like any other business out there, they must make money to survive. To do this, they will stop at very little. Laws have been passed in an attempt to stop post-claim underwriting, but the reality is that it still happens. You can protect yourself against post-claim underwriting by simply ask the question. But sometimes this may not be enough. If you find yourself involved in a post-claim underwriting situation, I might be able to find you a better alternative.
My simple rules:
Do your banking with a Bank
There are lower cost options available now and for some they are efficient. But banking with the big Banks has some advantages, like a physical location and convenient mobile apps.
Get your insurance from an Insurance Company
Having said that, never buy insurance over the phone or online. Deal with a licensed insurance agent, like myself only.
Get your investment advice from an Investment Firm
If you have the time and expertise to do your own trading and just need a place to hold your investments, a discount brokerage is a good choice. If you are looking for Investment Planning, Insurance Planning, Financial Planning, Tax Advice and Estate Planning, a Financial Facilitator like my firm should be the preferred choice.
