Frequently Asked Questions About Insurance

Answers to FAQs provide general guidance and customers should always refer to their certificate of insurance and the terms and conditions of their coverage.

Q: What is Credit Protection Insurance?

A: Credit Protection Insurance, also known as Creditor’s Insurance or Creditor’s Group Insurance, is used to pay out a mortgage or loan balance (up to the maximum specified in the certificate of insurance) or to make/postpone debt payments on the customer’s behalf in the event of death, disability, job loss or critical illness. It can be obtained for a variety of debt obligations, including mortgages, consumer loans, lines of credit, and credit cards. It is sold by banks and credit unions across Canada, including by CAFII member financial institutions.

Here are two examples of how Credit Protection Insurance works:

Marie takes out a $500,000 mortgage with a 20-year amortization period to buy a home. She is the main income earner, and does not want to leave her surviving family with any mortgage debt if she dies before the mortgage is fully repaid.

So she purchases Mortgage Life Insurance (which is a form of Credit Protection Insurance), which gives her the comfort of knowing that should she die, her outstanding mortgage balance will be paid out (up to the maximum specified in her certificate of insurance) and the surviving members of her family will be able to remain in their home without financial duress.

Alex gets a credit card from his financial institution. He purchases Credit Protection Insurance for this card so he will have protection against a number of potential risks, such as job loss, disability, accidental death, dismemberment, and critical illness.

In the case of involuntary job loss or disability, Alex’s Credit Protection Insurance will make the minimum monthly payments to the card issuer on his behalf to maintain his good credit rating. In the case of accidental death and dismemberment, or a critical illness, Alex’s Credit Protection Insurance will pay off the full outstanding balance on his credit card (within a prescribed range).

Q: What are the benefits of Credit Protection Insurance?

A: This type of insurance has multiple benefits. For example, if you are unable to make debt repayments due to reasons such as death, disability, critical illness or job loss, Credit Protection Insurance ensures that the debt is paid out to the maximum limit of the policy (in the case of death and critical illness) or that the loan payment is made or postponed on your behalf (in the case of disability or job loss). This will ensure your loan remains in good standing and protect your credit rating. Second, the group policy structure of Credit Protection Insurance allows more Canadians to be insured at economical standard rates, and almost all applicants are accepted. Third, Credit Protection Insurance is easy to obtain. With well-trained and supervised salaried staff at banks and credit unions, Canadians have coast-to-coast access to simple, optional insurance coverage on a 24/7 basis through more than 8,000 branches, telephone contact centres, and online. Fourth, Credit Protection Insurance is offered in exactly the amount of debt being taken on; and, as an optional benefit offered alongside a loan or mortgage product, it is inherently timely and convenient. Fifth, Credit Protection Insurance provides some forms of protection that are not readily available elsewhere, such as job loss insurance.

Here’s an example of how Credit Protection Insurance works:

Alisha would like to purchase job loss insurance so she can continue to make debt payments and maintain her good credit rating should she involuntarily lose her job. But for individuals, job loss insurance is difficult to find and expensive to purchase.

So Alisha decides to purchase Credit Protection Insurance on her credit card, knowing that job loss insurance is a key component of that coverage. In addition, since this type of insurance is normally sold as a part of a group policy, it is usually less expensive than buying job loss insurance as a separate coverage on its own. With this protection, if Alisha involuntarily loses her job, she can count on her insurance to make the minimum monthly payments on her credit card balance.

Q: Does Credit Protection Insurance provide good value?

A: An independent actuarial study conducted by the global consulting firm Towers Watson* compared the average premium rate per unit of life, disability, and critical illness insurance available under the Credit Protection form of insurance to the average premium rate per unit of identical amounts of individual insurance coverage. The study found that:

credit protection disability insurance is less expensive than Class 2A (i.e. clerical employees) individual disability insurance for all ages, amounts and genders;
credit protection critical illness insurance is less expensive than individual critical illness insurance for all ages, amounts and genders. However, while critical illness credit protection covers the three most common type of illnesses for which benefits are paid, its total coverage is not as broad as individual coverage**; and
credit protection life insurance is less expensive than individual Term 10 life insurance (renewed once over 20 years) for almost all (94%) of the customer profiles covered in the study, and is less expensive than Term 20 life insurance for more than half (55%) of the customer profiles covered in the study. The individual term life insurance products offer a level amount of coverage compared to the declining coverage under the credit protection insurance product.

The Towers Watson study also showed that applications for Credit Protection Insurance are significantly more likely to be auto-approved than are individual insurance (life, critical illness and disability) applications; and therefore fewer consumers have to go through the more complex and time-consuming underwriting process that is often involved in obtaining individual life insurance coverage.

* Towers Watson September 2015 Report: Comparison of the Customer Value Proposition of Creditor’s Group Insurance with Individual Insurance (using 2013 data)
** The three illnesses commonly covered by Creditor Critical Illness Insurance products are cancer, heart attack and stroke. According to the Munich Re Individual Life Insurance Survey based on individual policy claims in Canada until the end of 2009, cancer, heart attack and stroke are the most common types of illnesses for which benefits are paid for Individual Critical Illness policies. These three illnesses account for 86% of paid claims.

Thomas wanted to make sure he or his family could make or postpone debt payments with his financial institution in the event of his death, disability, or critical illness. So he looked at a number of options and decided on credit protection insurance as the best option for his mortgage.

Thomas learned that credit protection insurance is easy to obtain at his financial institution, and that some banks and credit unions may provide the option of adding job loss protection, which is not readily available with other types of insurance. And he discovered that, according to an independent study, credit protection insurance provides competitive rates and good value compared to term life insurance.

Furthermore, Thomas found that the study also showed that applications for credit protection insurance are significantly more likely to be immediately approved than are individual insurance (life, critical illness and disability) applications; and therefore fewer consumers have to go through the more complex and time-consuming underwriting process that is often associated with obtaining individual life insurance coverage.

Q: What are the benefits of Credit Protection Insurance compared to traditional Term Life Insurance?

A: Credit Protection Insurance for mortgages and loans is convenient, price-competitive and easy to obtain. For example, most applicants for this type of coverage are insured immediately without the need for additional health questions or medical tests. In addition, Credit Protection Insurance covers a broad range of risks, and people the same age pay the same standard group insurance premium rate regardless of health or occupation. Pricing of traditional Term Life Insurance, on the other hand, varies according to a number of factors including occupation, gender and smoking habits. Credit Protection Insurance also typically offers job loss insurance, which is difficult to find as an individual insurance coverage. In addition, for many people, Credit Protection Insurance provides a convenient opportunity to buy coverage as it is easily accessible at financial institutions across Canada.

Here is an example:

Karim wants a convenient, hassle-free and competitively-priced way to insure his mortgage. He is too busy to do medical tests, wants a premium that once established won’t go up as he ages, and would prefer to have job loss insurance included in his protection.

After researching his options, Karim decides to get Credit Protection Insurance on his mortgage from his financial institution, and benefit from the group rates it can provide.

Q: If I make a claim one day, how can I ensure it will not be denied?

A: Insurance companies that offer Credit Protection Insurance conduct a thorough and fair review of all claims to ensure that they comply with the terms and conditions stated in the certificate of insurance, a key document with which all insured people should become familiar. According to an independent actuarial study conducted by the global consulting firm Towers Watson, 95% of Mortgage Life Insurance claims are paid.* Typically, if a claim is rejected, it is because it has violated one of several exclusions which are standard throughout the life and health insurance industry. They include:

Suicide within the first two years of coverage;
Self-inflicted injuries;
Self-employed persons and voluntary job loss, with respect to job loss insurance;
Death while committing a criminal act such as drunk driving; and,
Customers who were not eligible for insurance when they applied.

* Towers Watson September 2015 Report: Comparison of the Customer Value Proposition of Creditor’s Group Insurance with Individual Insurance (using 2013 data)

Here is an example:

Tom voluntarily quits his job. He then informs his insurance company that he wants his job loss insurance to begin making minimum monthly payments on his credit card balance until he finds new employment.

Unfortunately, because Tom voluntarily quit his job, he does not meet the requirements for protection under the job loss insurance provisions of his Certificate of Insurance.

Q: Is there someone who can help me apply for Credit Protection Insurance?

A: Yes, all CAFII member financial institutions that offer Credit Protection Insurance have employees who are thoroughly trained on the products they sell, and who can be conveniently reached in branches or at call centres. In addition, you’ll find that the terms and enrollment process for Credit Protection Insurance products are relatively straightforward.

Here is an example:

Pat is considering Credit Protection Insurance for the personal loan he is getting from his financial institution, but he has a few questions.

So he makes a toll-free call to his financial institution’s call centre, asks to speak to someone about insurance, and gets connected with an employee who is trained and knowledgeable about Credit Protection Insurance. After getting his questions answered, Pat has a good understanding of what he is buying, and how the product will work.

Q: Do I have to buy credit protection insurance to get my mortgage, loan or credit card approved?

A: No. Credit Protection Insurance is completely optional. In addition, coercive tied selling, which means making the purchase of one product contingent on the purchase of another, is against the law. Negative option marketing, which is automatically selling you something unless you proactively decline, is also illegal. These practices are not permitted and are not used by CAFII member financial institutions.

Here is an example:

Michelle is hoping to get a consumer loan from her financial institution, which will make its lending decision based upon her credit rating and/or future income earning potential.

She understands that buying Credit Protection Insurance is a totally separate issue that has no impact on the credit-granting decision. Michelle decides she doesn’t want insurance on her loan balance, and her request for a loan is approved solely on the basis of her credit rating.

Q: Can I cancel Credit Protection Insurance (CPI)?

A: Yes. Customers can cancel their coverage at any time and pay no further premiums. Furthermore, CAFII members provide customers with a “review” period (typically 30 days) starting from when customers purchase CPI coverage. During this “review” period, customers may cancel their coverage and receive a full refund of the premium paid.

Here is an example:

When Todd gets his mortgage, he decides to buy Credit Protection Insurance on it. However, three weeks later, Todd changes his mind and decides to cancel the insurance.

Since Todd is still within the “review” period, the first month’s premium he paid is fully refunded, and the insurance coverage is discontinued.

Q: How can I learn more about the various insurance products sold by financial institutions?

A: The objective of CAFII members is to give customers the information they need to make informed decisions about the various types of insurance they want to purchase. This is accomplished through product brochures, insurance certificates, websites, and highly trained sales staff in branches and call centres. Customers are encouraged to take all the time they need to understand which products best meet their needs. And once they make a decision, customers are provided a “free look” period (typically 30 days), during which they can have insurance coverage and then cancel with a full refund of the premium paid, if it does not meet their needs.

Here is an example:

After reading a brochure and talking to sales staff at a call centre, Brianna decides that she wants to purchase Credit Protection Insurance to cover the balance on her new car loan.

However, three weeks later she changes her mind and decides she no longer wants this insurance. So Brianna contacts her financial institution, cancels the policy, and obtains a full refund.

Q: Where do I go if I have a complaint?

A: The best place to start is with the financial institution that sold you the insurance, which typically has customer service staff and an Ombudsperson who investigates unresolved customer complaints. If you are not satisfied with the response of your financial institution, you can escalate your complaint to the OmbudService used by your financial institution. Your CAFII member financial institution can advise you on the complaint escalation process. While the number of complaints about Credit Protection Insurance is very small, every complaint is taken seriously and given the full attention it deserves.

Here is an example:

Carol is unhappy with the length of time it took to resolve an insurance claim she made.

She puts all the facts together in a letter and sends it to the financial institution that sold her the insurance. The matter is investigated and a resolution proposed, but Carol is not satisfied with it. If her financial institution has an Ombudsperson, Carol contacts that person and asks for her case to be reviewed.

If Carol is still not satisfied with the response from the Ombudsperson at her financial institution, she sends the file to the independent OmbudService used by her financial institution, which conducts its own investigation and makes an independent recommendation.

If you are not satisfied with the response you have received to a complaint, there are additional resources available to you. Please visit our Enquiries and Complaints section: click here

Q: Does Credit Protection Job Loss Insurance cover instances where a resignation was justified?

A: Credit Protection Job Loss Insurance covers a completely involuntary separation from employment. Typically, this may include a lay-off, dismissal without cause, a unionized labour dispute, a legal strike or a lockout. It typically does not cover people who quit their job, get fired for cause, stop working for medical reasons including pregnancy, or stop working for family-related reasons.

Here is an example:

Joe has Credit Protection Job Loss Insurance on his mortgage and credit card. He’s not happy with the way his boss is treating him at work, so he quits his job and makes a claim on his Job Loss Insurance. Unfortunately, Joe’s claim is denied because he voluntarily left his job. If Joe had checked his certificate of insurance before quitting his job, he would have been familiar with how his insurance provider defines job loss and the circumstances under which he would qualify for benefits payments under his Credit Protection Job Loss Insurance.

Q: How do you make a Credit Protection Job Loss Insurance claim?

A: The claim process will vary depending on which financial institution you purchased your insurance from and what it covers (mortgages, loans, lines of credit and/or credit card balances). If you purchased your insurance from a CAFII member, please go to the “How to Make a Claim” section of this website, find the name of the financial institution, and click on the link to its website.

Q: What are the types of Credit Protection Insurance?

A: The main types of Credit Protection Insurance are Life, Disability, Critical Illness and Job Loss. These types of insurance protection can be obtained for a variety of debt obligations including mortgages, consumer loans, lines of credit and credit card balances.

Here are some examples:

Martine and Joseph have been approved by their bank or credit union for a $30,000 personal loan to purchase a car. Should one of them pass away before most of the car loan is repaid, the surviving spouse may find it difficult to continue making the monthly payments on the loan.

So, Martine and Joseph purchase life insurance on their personal loan. In the event that one of them passes away, the insurance will pay out the outstanding balance on their insured loan (up to the maximum specified in the certificate of insurance), making it more likely the surviving spouse can keep the car.

Martine could just have insured her life for the loan, but since both spouses are working and contributing to the household finances, she wanted Joseph’s life to be insured, too. And insuring two people on the same loan is a better deal, as premiums for the second person are usually 30% to 50% less than for the first person.

When Nick’s friend became temporarily disabled in an accident and was not able to make monthly payments on his personal loan, the family car was repossessed. That’s because Nick’s friend, like nearly one-third of Canadians today, did not have enough rainy day savings to cover even one month of expenses.

So when Nick borrowed $40,000 from his financial institution to buy a car for his own family, he decided to purchase Disability Insurance on his Personal Loan as part of a bundle that included Life Insurance and Critical Illness Insurance. “I wanted to have a safety-net,” he told friends.

Nick was comforted by the fact that should he be unable to work due to a short-term disability, the regular payments of principal and interest on his insured loan and the applicable insurance premium would be paid for a designated period of time – usually starting after a 30- to 60-day waiting period, and continuing for up to 24 months.

Nadine has a $25,000 personal loan that she used to purchase a new car.

Nadine is worried that should she unexpectedly experience a serious illness such as heart attack, stroke, or life-threatening cancer, she may not be able to continue making payments on her loan and keep the car and her good credit rating.

So at the financial institution where Nadine took out the personal loan, she signs up for Critical Illness Insurance to cover the outstanding balance. Nadine knows that this type of insurance will pay out the outstanding balance on her loan (up to the maximum specified in the certificate of insurance) in the event that she contracts one of the named critical illnesses covered under the policy.

Unfortunately, three years after buying her new car Nadine has a stroke. While she is expected to recover, it could take a year or more. However, since Nadine has Critical Illness Insurance on her personal loan, her insurance pays off the balance owing on the loan, relieving her of a financial worry during a stressful and trying time.

Q: Where do the insurance proceeds payment go if I make a claim on my Credit Protection Insurance?

A: After your claim has been adjudicated, the insurance proceeds payment will be used to pay out your insured debt balance (up to the maximum specified in the certificate of insurance), or to make/postpone debt payments on your insured debt on your behalf.

Here is an example:

Vicky and Bob, who have two children, have been approved for a $500,000 mortgage to purchase a home. Vicky is the primary income earner, and the family’s ability to make their mortgage payments is largely dependent upon her income.

Peace of mind and predictability of expenses are important for Vicky and Bob, so they purchase Mortgage Life Insurance for Vicky that will pay off the balance of their mortgage in the event of her death. They like the fact that their premiums will not change over the life of their mortgage, which means that they are not exposed to higher costs for this coverage as Vicky ages or possibly develops health issues.

They also like the fact that the proceeds of her mortgage life insurance will go directly to pay off the mortgage balance rather than possibly being used to pay other debts. It’s important to Vicky to know that, should she die, her family will be able to continue living in their family home, without financial duress.

Q: When should I get Credit Protection Insurance?

A: Whenever you have dependants, are a relied-upon income earner and contributor to your family’s financial well-being, and are worried that you may not be able to make your debt repayments due to an unexpected event such as death, disability, critical illness or job loss, it is a good time to consider credit protection insurance.

Here is an example:

Josie and Mario just bought a home for their young family of four, and they had to take out a sizeable mortgage with a 25-year amortization period to do so. They also have a personal loan for their family car.

As the family’s main income earner, Josie is concerned that if she were to become disabled, critically ill, or pass away, Mario would not be able to handle their monthly debt payments on his own, and they could lose their house and car.

So, Josie purchases three types of Credit Protection Insurance — Life, Disability, and Critical Illness – on herself for their Mortgage and personal loan.

This gives her the comfort of knowing that her Credit Protection Insurance coverages will pay out her mortgage and personal loan balance if she was to pass away or be diagnosed with a critical illness (up to the maximum specified in the certificate of insurance) or make/postpone debt repayments on her behalf if she was to become disabled.

Q: Who can apply for mortgage life insurance?

A: Canadian residents who are 18-64 years of age can apply for mortgage life insurance at a bank, credit union or broker when they apply for a mortgage, or at the financial institution that already holds their existing mortgage.

In certain situations, applicants will need to answer a brief medical questionnaire. If they answer ‘NO’ to all of the applicable health questions on the application form, their application is usually approved and the insurer does not require any additional health information. If applicants answer ‘YES’ to any of the applicable health questions, they will be asked to provide additional information before a decision is made.

According to an independent study*, 95% of mortgage life insurance applications in Canada are approved.

You can find a list of CAFII member companies that offer mortgage life insurance at:
https://members.cafii.com/index.php/members_voting

* More information about this study can be found under the FAQ “Does Credit Protection Insurance provide good value?”

Ron is buying a home, and will need a mortgage to help pay for the purchase. So he applies for a mortgage at his financial institution.

As part of the application process, Ron is offered optional mortgage life insurance, a form of credit protection available for his mortgage. Ron is aware that the mortgage will likely be the largest debt that he and his family will ever have, and he’s worried about whether his spouse and children would be able to continue paying off the mortgage and remain in the family home if he were to pass away.

So Ron applies for mortgage life insurance and is approved. This gives Ron the comfort of knowing that should he die, his mortgage balance would be paid off to the maximum specified in the certificate of insurance, and his family would be in a better financial position and able to continue living in their home.

Q: Is there a maximum amount of coverage available for mortgage life insurance?

A: Most policies have a maximum limit on the amount of coverage one borrower can be insured for across all of his/her mortgages. This maximum amount will be explained when you apply for Mortgage Life Insurance, and will be documented in your certificate of insurance. But even if your starting mortgage balance is higher than the maximum insured limit, you can still insure it up to that limit.

Tannis and Chris are upgrading to a more expensive home, and will need a larger than average mortgage amount – around $800,000. They want to get life insurance coverage for their new mortgage, but are wondering if they will qualify given its size.

They talk to Francine, a mortgage specialist at their financial institution. She tells them that most mortgage life insurance policies have a limit on the size of the mortgage balance that can be insured, and that it can range from $500,000 to $1,000,000. Francine explains that Tannis and Chris can insure their mortgage up to the maximum allowable limit.

Q: Do I need mortage life insurance if I have other life insurance already in place?

A: Some people choose both insurance options – mortgage life insurance to pay off all or some of their mortgage loan balance, and term life insurance to leave their survivors with additional money to use as they wish.

Mortgage life insurance has many appealing features and benefits.

For example, most applicants are insured immediately upon completion of a simple, straightforward application form, without the need for additional health questions or medical tests. In addition, all applicants of the same age and the same gender pay the same standard, economical group insurance premium rates.

Consumers who apply for mortgage life insurance may have the option to add disability, critical Illness, or job loss coverage, which can provide further financial protection for their families.

In addition, mortgage life insurance premiums remain stable for the duration of the mortgage (amortization period). Since premiums will not increase as you age or your health changes, this makes it easier to predict your insurance expense, enabling you to budget accordingly. And once your mortgage is paid off — or once you pay the mortgage balance down to a level where you feel that life insurance protection on the mortgage itself is no longer needed and you therefore decide to cancel the coverage — you no longer have a premium to pay.

Furthermore, since mortgage life insurance is available at many financial institutions across Canada, it is easy and convenient to purchase.

Here is an example:

Samantha and her husband Eric are in their mid-30s, have two young children, and are paying down the $400,000 mortgage on their home.

Samantha, who is the family’s primary income earner, already has $100,000 of individual term life insurance in place plus an additional $100,000 of life insurance coverage through her employee group benefits plan. When she is asked by the mortgage specialist at her financial institution if she and Eric want to add optional mortgage life insurance, they talk to a family friend first before deciding.

What they discover is that some people choose to have mortgage life insurance in place alongside other types of life insurance coverage. This is because they don’t already have sufficient life insurance to cover their mortgage. For example, Samantha and Eric have $200,000 in life insurance, versus $400,000 in mortgage debt. So it makes sense for them to get additional life insurance coverage so that their family will have a sufficient level of financial protection should one or both of the spouses pass away.

They also learn that mortgage life insurance has many benefits, including that it is easy to apply for, and that the cost of premiums will not increase as they age over the full duration of the mortgage, or if one or both of them were to develop adverse health conditions.

Q: Who gets the money from my Mortgage Life insurance if I die?

A: The proceeds will go directly to your financial institution to pay out your outstanding mortgage balance (up to the maximum specified in the certificate of insurance), leaving your family with one less debt to handle at a very stressful and financially challenging time, especially if you have been the primary income earner. By directly covering a large and specific debt obligation with your Mortgage Life Insurance, your heirs will be free to use proceeds from other life insurance policies they may have to pay other bills and provide future income for their family.

Here’s an example of how Mortgage Life Insurance works:

Q: When do financial institution insurers assess whether my current medical situation qualifies me for the insurance coverage I want and may one day make a claim for?

A: For products where you need to answer a brief medical questionnaire up-front such as for Mortgage Life Insurance and Mortgage Disability Insurance, that assessment is made at the time of application. If you answer ‘NO’ to all of the applicable health questions on the application form, then your application is usually accepted and the insurer does not require any additional health information. If you answer ‘YES’ to any of the applicable health questions, you will be asked to provide additional information through a health assessment; and, in some cases, your application may require further underwriting assessment before an approval decision is made.

According to an independent actuarial study conducted by the global consulting firm Towers Watson, 95% of mortgage life insurance applications in Canada are approved*. Approval for Credit Protection Insurance using health information means that at the time of claim, the benefit will not be limited due to a medical condition that was disclosed during underwriting. The insurer will, however, review the health information that was provided at the time of application for accuracy and completeness. This is a normal part of insurance claim assessment for all types of life and health insurance.

Underwriting is a term used by life insurers to describe the process of assessing risk, and ensuring that the cost of the coverage is proportionate to the risks to be borne by the insurance company. Most types of Credit Protection Insurance coverage, including Mortgage Life and Mortgage Disability Insurance, are provided under a group policy rather than being individually underwritten. Credit Protection Insurance covers a broad range of risks and every one of the same age pays the same rate regardless of health or occupation.

For products where there are no health-related questions asked up-front, such as for credit cards and small amounts of insurance on loans and lines of credit, you are provided with a certificate of insurance that spells out the circumstances where any pre-existing medical conditions would limit a benefit should you make a claim within the first 12 months of coverage.

The use of a pre-existing condition limitation does not prevent you from obtaining credit protection insurance at standard premium rates, and it allows you to make a claim at any time for conditions that did not exist before you bought the insurance. In addition, after the pre-existing condition period of the first 12 months has passed, you can make a claim for the pre-existing conditions as well.

* Towers Watson September 2015 Report: Comparison of the Customer Value Proposition of Creditor’s Group Insurance with Individual Insurance (using 2013 data)

Here are some examples:

Karim submits a brief health questionnaire that is required to obtain his Mortgage Life Insurance.

Karim answers “NO” to all of the applicable health questions on the application form. Karim is accepted for coverage. If a claim is later submitted on Karim’s behalf, assuming Karim completed the health questions accurately, his claim would be eligible for a benefit subject to general limitations in the policy.

Marsha applies for Disability Insurance on her car loan. There are typically no health questions required for Disability Insurance on Personal Loans.

Marsha is given a certificate of insurance that explains what a pre-existing condition is and how it affects a potential claim for benefits. If Marsha were to submit a claim for benefits within the first 12 months of coverage, the insurer would assess at that time whether the condition for which she is making a claim meets the definition of a pre-existing condition listed in the certificate of insurance; and, if so, the benefit will be limited accordingly.

If Marsha were to submit a claim in the first 12 months of coverage caused by a condition that was not pre-existing, the claim will be eligible for a benefit. If Marsha were to submit a claim two years after the coverage is in place, the claim will be eligible for a benefit regardless of whether the condition leading up to the claim was a pre-existing one.

Geoff buys Mortgage Life Insurance and answers ‘Yes’ to one of the health questions on the brief health questionnaire.

The insurer requests that Geoff complete some medical tests and makes a decision to approve Geoff for the insurance. Like all other clients who have that particular Mortgage Life Insurance coverage, Geoff will pay the standard group premium rates. Because Geoff was underwritten for his Mortgage Life Insurance, he will not be subject to a pre-existing condition limitation. In other words, the insurer assessed his medical condition and decided it fell within the risk parameters of the insurance policy. If Geoff were to make a claim at any time, the insurer will thoroughly assess the claim, as is standard practice in the industry, and will review the health information that Geoff provided at the time of application for completeness and accuracy.

If the claim is related to Geoff’s medical condition discovered during the application process and the insurer finds that Geoff provided complete and accurate disclosure of his condition at that time, Geoff’s eligibility for a benefit will be the same as the eligibility of any other person who did not have that same medical condition.

Q: If I purchase mortgage life insurance will my premium increase over time?

A: Unlike with individual term life insurance where your premium will likely increase at regular intervals as you age, the premium for Mortgage Life Insurance remains stable over the full duration of your mortgage with your financial institution because it was designed to provide you with a predictable, constant and affordable premium throughout the entire life of your mortgage. If your mortgage balance is reduced to a level where you no longer feel the cost of having life insurance on it is worthwhile, you can always choose to cancel the coverage and pay no further premiums.

Here is an example:

Deepa wanted to add mortgage life insurance to her mortgage, but she was worried that the cost of the monthly premium would rise steeply as she got older over the 30-year amortization period of her mortgage, and that she might not be able to afford it one day.

So she spoke with her friend, Caroline, who had enrolled in mortgage life credit protection insurance many years ago at her own financial institution.

Caroline told Deepa that, unlike other types of life insurance where the premiums go up at regular five, 10, or 20 year intervals, the premium for mortgage life insurance remains stable over the full duration of the mortgage. She explained that this is because mortgage life insurance is designed to provide people with a predictable, constant and affordable premium throughout the entire life of their mortgage.

Caroline also told Deepa that when her mortgage balance is reduced to a level where she no longer feels the cost of having separate life insurance on it is worthwhile, she could then choose to cancel the coverage and pay no further premiums.

Deepa liked the fact that she would not be exposed to higher premium costs for her mortgage life insurance coverage as she ages or possibly develops health issues. So she decided to proceed with applying for mortgage life insurance from her financial institution.

Q: What is credit protection disability insurance on a mortgage?

A: Credit Protection Mortgage Disability Insurance covers your ongoing mortgage payments for a specified period of time should you become disabled due to illness or injury that prevents you from performing what were the regular duties of your occupation prior to your disability’s manifestation. This type of coverage is typically purchased with Credit Protection Mortgage Life Insurance.

Here is an example:

Vishal wanted to make sure he and his family could make or postpone debt repayments with his financial institution in the event he became disabled. So, he purchased Mortgage Disability Insurance, which is usually an optional add-on to Mortgage Life Insurance.

Vishal discovered that Mortgage Disability Insurance would pay all or part of his monthly mortgage payment to his financial institution should he be unable to work due to short-term disability. He’ll still be responsible for resuming his debt repayments when he recovers from his disability or when the benefit period ends (typically up to 24 months), whichever comes first.

Q: Does Credit Protection Mortgage Disability Insurance cover short-term disability?

A: Credit Protection Mortgage Disability Insurance covers short-term disability for a specified period of time – usually starting after a 30- to 60-day waiting period, and continuing for up to 24 months.

Here is an example:

After using most of her savings to buy a new home, Lianne wondered if she would be able to make her monthly mortgage payments and keep her house if she became temporarily disabled due to an injury that prevented her from working.

When speaking with a friend, Lianne learned that Mortgage Disability Insurance could provide the type of protection she was looking for and that she could purchase it at economical group rates from the financial institution providing her mortgage. This type of insurance would cover her monthly mortgage payments (up to a maximum amount) for up to 24-months if she could not work due to disability. It is usually purchased along with Mortgage Life Insurance.

A few years later, Lianne was seriously injured in a fall down a flight of stairs and could not work for five months. However, after a short waiting period, Lianne’s Mortgage Disability Insurance kicked in and began making her $2,500 monthly mortgage payments. As result, Lianne was able to remain in her home without making mortgage payments until she fully recovered from her injuries and was able to return to work.

Q: What's the difference between Credit Protection Mortgage Disability Insurance and Credit Protection Mortgage Critical Illness Insurance?

A: Credit Protection Mortgage Disability Insurance will pay all or part of your periodic mortgage payments to your bank or credit union while you are unable to work due to disability. You’ll be responsible for resuming your debt repayments when you recover from your disability or when the benefit period ends, whichever comes first.

Credit Protection Critical Illness Insurance is not related to employment and your ability to work. You can be covered and receive a benefit from this type of insurance regardless of your employment status. It can pay off all or a portion of your insured debt obligations in one lump sum, thereby freeing up your money for other uses.

These two types of credit protection insurance may be purchased together, along with credit protection mortgage life insurance, or separately on their own.

Here are some examples:

Should he ever experience a serious illness such as heart attack, stroke, or life-threatening cancer, Salim wants to know that all or most of the outstanding balance on his mortgage would be paid off, especially since he is the main wage earner in his family.

As a result, Salim applies for Mortgage Critical Illness Insurance from his financial institution; and after answering a few health-related questions, is approved for coverage.

Eight years later, Salim is diagnosed with cancer and is unable to work. His Mortgage Critical Illness Insurance then pays off the balance of the mortgage on the family’s home.

Salim’s family members are devastated by his cancer diagnosis, but relieved that they do not have to worry about making ongoing mortgage payments during this stressful time. The insurance coverage not only eliminates the family’s largest monthly bill, it also frees up much-needed money to use for health-related expenses such as private nursing care, physical therapy, medical equipment, child care and babysitting services, and modifications to the home.

It may take several years before Salim recovers, but his Mortgage Critical Illness Insurance allows him and his family to remain in their home without worrying about having to make mortgage payments.

Q: Do you need to undergo a medical examination to apply for Credit Protection Mortgage Disability Insurance?

A: You will need to answer a brief medical questionnaire at the time that you apply for Credit Protection Mortgage Disability Insurance. If you answer ‘NO’ to all of the applicable health-related questions on the application form, then your application is usually accepted, and the insurer does not require any additional health information. If you answer ‘YES’ to any of the applicable health-related questions, you will be asked to provide additional information through a health assessment; and, in some cases, your application may require further underwriting evaluation before an approval decision is made.

Here is an example:

Kendrick applies for Disability Insurance on his mortgage.

Kendrick answers “NO” to all of the applicable health questions on the application form and is accepted for coverage. If he later becomes disabled, assuming Kendrick completed the health questions accurately, his claim would be eligible for benefits which would take care of his mortgage payments (up to a maximum amount) for up to 24 months, subject to the general limitations specified in the policy.

If Kendrick answers ‘YES’ to any of the applicable health questions, he will be asked to provide additional information through a health assessment; and, in some cases, his application may require further underwriting assessment before an approval decision can be made.

Q: How do you make a Credit Protection Mortgage Disability Insurance claim?

A: The claim process will vary depending on which financial institution you purchased your Mortgage Disability Insurance from. If you purchased this insurance from a CAFII member, please go to the “How to Make a Claim” section of this website, find the name of the financial institution, and click on the link to its website.

Q: What is travel insurance?

A: Travel Insurance is designed to protect you and your family from a variety of unexpected expenses related to travel outside of your home province, and it is available in two broad categories: Travel Medical Insurance, and Trip Cancellation and Trip Interruption Insurance. These two types of travel insurance can be purchased separately or together as a bundle.

Travel Medical Insurance covers emergency medical care expenses if you become suddenly and unexpectedly sick or if you have an accident while outside your home province.

Trip Cancellation Insurance will reimburse you for the amount of pre-paid, non-refundable travel expenses (e.g. airline, cruise, train, hotel, etc.) that you have insured, should you cancel your trip before departure for an unforeseen covered reason.

Trip Interruption Insurance is similar to Trip Cancellation coverage, but covers you while you are on your trip for a list of covered reasons. If due to a covered reason you are required to return home, Trip Interruption Insurance will reimburse you for the lost portion of your trip, as well as for any additional expenses for a last-minute flight home.

Here are some examples:

During his annual winter vacation in Florida, Mark falls one day and severely injures his head. He has to be admitted to hospital for several days, examined by a specialist, and undergo a battery of tests including a magnetic resonance imaging (MRI) scan.

Without Travel Medical Insurance, Mark would have to make arrangements with the Florida hospital to pay his bill for more than US$20,000. But because Mark purchased Travel Medical Insurance before he left Canada and his injury was a medical emergency covered under the policy, his insurance provider pays all of his hospitalization and treatment expenses directly to the U.S. hospital.

Rob and his wife Leslie are planning a Caribbean cruise vacation from Miami, and they’re wondering if they should buy Trip Cancellation Insurance. The trip will be expensive, and they will have to pre-pay for a number of things in advance, most of which will be non-refundable — such as airfare and the cost of the cruise.

They are worried that should they have to cancel their trip before they leave, they would completely lose the money that they have pre-paid for the non-refundable parts of their trip. And it could take years before they could save that much money again to take the same trip.

Leslie suggests they purchase Trip Cancellation Insurance. She finds a policy she likes because it will reimburse her and Rob for the full amount of pre-paid, non-refundable travel expenses that they have insured, should they have to cancel their trip before departure for an unforeseen event covered under the policy.

A week before they are scheduled to leave on their trip, Rob breaks his leg in a skiing accident. His doctor deems him unfit to travel. So they make a claim under their Trip Cancellation Insurance and receive a full reimbursement of their pre-paid travel expenses.

Linda and Vince are thinking of purchasing Trip Interruption Insurance for their upcoming European holiday.

Trip Interruption Insurance is similar to Trip Cancellation Insurance, but the former covers insured travellers for unforeseen events that occur after a trip has begun, rather than before it starts. If they have to return home for a covered reason, Trip Interruption Insurance will reimburse Linda and Vince for the lost portion of their trip, as well as for any additional expenses for a last-minute flight home.

Since Trip Interruption Insurance can be purchased along with Trip Cancellation Insurance, Linda and Vince decide to get both at the same time so that they will be protected should an unforeseen covered event cause them to have to cancel their trip or end it prematurely.

Q: How far in advance should I buy Travel Medical Insurance?

A: Travel medical insurance must be purchased prior to travel. In cases where people have recently had a serious medical procedure or surgery or are taking certain medications, they need to check how much time their policy requires to have passed post-operation and/or since use of the medications began to qualify for insurance. This period is typically referred to as the pre-existing condition “look-back” period. Depending on how long the look-back period is, people may have to wait until closer to their departure date to qualify for coverage.

Q: How far in advance should I buy Trip Cancellation Insurance and Trip Interruption Insurance?

A: The best time to buy Trip Cancellation Insurance is before any trip cancellation fees come into effect. For example, if you paid a deposit or the full fare for a cruise, hotel or airplane ticket, you may lose some or all of this money if you cancel your trip after the cancellation date stated in your reservation with the travel provider.
Trip Interruption Insurance is usually included as a package with Trip Cancellation Insurance, so the same situation applies. However, if you are purchasing Trip Interruption Insurance separately, you may wish to wait much closer to departure date to purchase it as it only provides protection for non-refundable expenses once your trip has begun.

Q: What is included in Trip Cancellation Insurance?

A: The standard Trip Cancellation Insurance will usually reimburse you for your pre-paid, non-refundable expenses should you cancel before your trip starts for a covered reason such as an accident, death, family illness, jury duty and more (changing your mind is not a covered reason). The type of expenses that are eligible for reimbursement include flights, trains, hotels, house rentals, and cruises. However, if the insured receives a credit/voucher for a cancelled flight, cruise, train, hotel room, etc., those expense will not be eligible for reimbursement in most cases.
There is also Trip Cancellation Insurance coverage that will cover you should you cancel before your trip starts for any reason, including changing your mind. Premiums for this type of cancel for any reason (CFAR) coverage are higher than what you would pay for standard trip cancellation insurance. In addition, CFAR coverage typically provides a partial payment of the pre-paid, non-refundable insured travel arrangements – usually 50%. Once again, many policies consider a credit or voucher as a form of reimbursement.

Q: What pre-existing medical conditions are not covered by Travel Medical Insurance?

A: Conditions not covered may vary by provider and level of travel medical insurance purchased. For example, insurance providers typically offer several levels of coverage that provide higher levels of coverage and fewer exclusions for a higher price. So, it is best to check what is covered before deciding which type of coverage to purchase. Typically, pre-existing medical conditions affecting the heart and lungs which have not been stable for the number of days specified in the certificate of insurance (typically 90 days prior to travel) are among the conditions excluded from coverage. The same may apply if certain drugs have been taken and/or changed during the period stated in the certificate of insurance.

Q: Do you need travel medical insurance when travelling within Canada?

A: It is highly advisable to have travel medical insurance when travelling in Canada outside your home province. This is because your provincial health plan will reimburse only what they would have paid if you had the medical emergency in your home province, and you will have to cover any shortfall.

As a result, if you are unlucky enough to become ill outside your home province, you may incur significant medical bills that may only be reimbursed in part, or not at all. In addition, out-of-province ground and air ambulance, as well as repatriation expenses, are not covered under Government Health Insurance plans.

For more information, please see the Government of Canada Travel Insurance website.