Underwriting Life Insurance - Dead Or Alive?
This is why you should say no! ….. to the banks. You are only properly insured when your life insurance policy has actually been "underwritten". BUT the banks (and many credit unions and mortgage brokers) do not actually “underwrite” your life application when you apply. So what is going on there?
You are asked to hastily complete a short, ambiguous application form usually while signing your mortgage documentation. In many cases, the loan’s officers receive a “bonus” for completing each application. They have little or no training and they are not licensed to sell life insurance (banks have cleverly been exempted from the regulations that govern insurance brokers).
Using this self-approval method, they do not actually underwrite (investigate, verify, confirm) any of the information provided, until the applicant dies. This is known as “Post Claim Underwriting”. Only following a death do they determine if an applicant actually qualifies! There are many sad cases of those who paid premiums often for many years and yet did not and never would have qualified. Many states in the U.S.A. have made these types of self-approved, post-claim underwritten policies illegal.
Why do the banks sell these inferior mortgage and life insurance products? Primarily, because one bank alone generated over one billion dollars of premiums last year. And the reason they issue them is because they have no underwriting costs! They collect the premium on 100% of all policies issued, and they underwrite only those policies that have a death claim.
That is why we suggest – just say no to the bank! Buy your mortgage at the bank – but not your insurance.