#MortgageInsurance #LifeInsurance #AppealDeniedClaim
Hey Reddit fam! 🌟
I need some advice on a tough situation my mom is facing. Her mortgage insurance claim got denied, and now she’s feeling stuck. Here’s a bit of background:
– Dad passed away a few months ago
– Mom’s claim was denied due to a health issue Dad didn’t disclose
– Mom’s income: $101,000/year
– Life insurance payout: $120,000
– Savings: Less than $50k
– Mortgage: $350k at 5% fixed for 3 years
Considering the circumstances, my mom is thinking of appealing the decision with the help of a lawyer. What do you guys think? Any other options or insights on what her next steps should be?
I’m also willing to put my university plans on hold to help out financially. Have you been in a similar situation or have any advice to share with us? Any tips would be greatly appreciated! 🙏
Thanks for your help, Reddit! 🌼
Depends on the coverage, but if he has a pre-existing condition that he did not disclose, its likely the insurer will not pay out. There is not really wiggle room here or generosity/compassion.
Look at the policy and see what it says about pre-existing conditions and whatnot.
If your mom makes $100k, was paid out $120k and has a $350k mortgage, she should be able to tread water for a while and sort out what life looks like going forward. I wouldn’t push University for 2 years to help. Apply for government grants and loans and do that.
Sorry for your loss
yes, she needs to get lawyers involved.
Not a lawyer. I would personally consult with a lawyer to review your case as there is still a large mortgage on the property. Was the undisclosed health issue the cause of his death?
Hate to break it to you, but, very steep uphill battle. Non-disclosure of preexisting medical conditions is a common reason for an insurance company to deny a claim. And, “my dad forget to disclose” is a very suspect excuse. I have diabetes – I cannot imagine a scenario where I “forgot” or “forget” that I have diabetes when someone asks me about any medical conditions that I may have. Moreover, I suspect most lawyers would be loathe to sue a larger insurance company. A competent lawyer may not even want to send a “threatening letter” to a large insurance company. Insurers have deep pockets, banks have deep pockets and bank owned insurance co’s have deep pockets. I would imagine it is quite costly to lawyer up to sue a bank/large insurance company. Heck, if you can find a competent lawyer to simply write a threatening letter for you – they charge for that too, and, well, the banks/insurance companies have (I would imagine) decent lawyers. And so I would imagine they can sniff out a bluff pretty easily. If you’re going bluff, you need to be able to see it through and pull the trigger – and in the case of suing an insurance company, pulling the trigger is actually filing a claim to start the process of suing them, and that will be costly in both time and money.
did he die due to that one health issue? If so, or even it was partially related, they can get away with denying the claim. If it was completely unrelated, it might be worth a shot.
You need an insurance lawyer.
This isn’t directly preexisting condition.this is the incontestibility clause. Insurers can contest i.e.not pay a claim if information was asked and not disclosed. But, the information that wasn’t disclosed has to be material. What’s material? That’s where the lawyers come in.
The question will be, what does the life company think of its chances in court? Generally they’re not good. So some communication from a lawyer can make them sit up and negotiate. Depending on what wasn’t disclosed, maybe they pay nothing, maybe they pay some, maybe they pay the whole thing. But without a lawyer, it’s nothing.
A friend of my sister had a similar mortgage life insurance claim contested, but after a year or so they paid out $1mm.
And that’s one of the biggest problems with mortgage life insurance (amongst a host of big problems). You are self underwriting instead of having the life company underwrite. And most people instead of answering the question being asked, answer the question not asked, namely ‘is there anything wrong with your….’. not what was asked.
Hire a lawyer to evaluate the claim. If there’s any wiggle room, they can at least negotiate a settlement.
It depends upon the scale/scope of the prior issue, and whether it was related to the claim made. High blood pressure and/or cholersterol and he died of a heart attack? you’re not going to have luck.
sleep apnea and he died of brain cancer? unrelated and your mother might have a case.
find a good lawyer, have they evaluate the case.
Reminder to folks when getting insurance, be honest, do bloodwork, or get the don’t tell don’t ask type of insurance. Tying to save a couple bucks here and there when really you were wasting hundreds every year on something that had zero value.
worst case even if he didn’t disclose, surely you get at least the premiums back no?
I can’t imagine a case where they reject the claim and keep the premiums since the claim rejection implies you were never insured
But I would also at a minimum have a consult with an insurance lawyer
Mortgage insurance is a terrible product. Even if your dad didn’t have an existing condition that he failed to disclose, the insurance company would have found a reason to deny your mother’s claim. That’s very typical for mortgage insurance.
Unfortunately she could spend more on lawyers than the insurance payout is worth.
I recommend that you contact the OmbudService for Life & Health Insurance (OLHI) [https://olhi.ca/](https://olhi.ca/) (from their website: Any consumer whose company is an OLHI member can use our services. 99% of Canadian Life and Health Insurance companies are OLHI members.) and you can also contact your provincial insurance regulator before going the lawyer route. There may be reasons that the insurance company’s stance isn’t correct and they are just doing the delay, deny, defend for their bottom line. It is impossible for anyone here to know.
This case illuminates a strong reason that people should opt for individually underwritten insurance instead of creditor insurance.
Pro tip: never get insurance from
A bank for any product- it’s a massive scam.
IF they pay out, your credit will likely be destroyed before you get anywhere with it. And 9/10 times, even on a valid claim, they find some way to weasel out of paying.
Source: Former financial advisor for Scotiabank, current debt collector for RBC.
Your mom CAN afford the mortgage on that income. You’re doing the right thing holding off adding to her expenses, good son.
She should get a lawyer and fight for the insurance, yes.
I am so sorry to hear you are going through this.
Unfortunately, mortgage insurance is not the same as an individually-owned insurance policy.
A huge distinction is that the applicant does not go through the underwriting process until time of claim on mortgage insurance (death). Underwriting is when the insurance company decides whether they want to take the risk of insuring you, so they ask a million health questions. The mortgage insurance, they ask like two questions as to approve you to pay premiums.
On an individually-owned policy, underwriting is done before they approve you and once in force, it’s a binding contract.
Sadly, your story is not atypical. The way this product works is a shock for many.
Is it possible your Dad has group life insurance through work or the employer he retired from (if the case)?
If the claim is denied and unsuccessfully appealed, then there should be a refund of premium payments available
Read the policy. There is often a clause about 2 years or 3 years on such policies about non-disclosure, but usually it’s of things like smoking and age.
As for the mortgage. The bank can likely re amortize the mortgage over 25 years and reset the payments based on the minimum if the mortgage was re amortized, but should would need to qualify for that payment, as if it’s a new mortgage. The other option is to sell the house.
This is precisely why mortgage insurance is terrible. When you apply for traditional mortgage insurance the underwriting is done at time of claim (after you die) vs when you apply with individually owned term insurance.
There are decades old CBC Marketplace episodes on this.
The few questions that are asked on the application form are broad and people can very easily answer incorrectly (example have you ever been treated for, investigated or told you have high blood pressure? if you’ve had your blood pressure checked and regular blood work it’s yes – but most people who aren’t on blood pressure medication would answer no not fully understanding the nuance of the question).
He had a pre-existing condition that was not disclosed. They are allowed to deny the claim.
Consider taking 1 less class and a part-time job. Typically you can do 4 courses and stay full time. But this could have issues with your class order. Can also do the course in summer while working.
CONTIGUENCY LAWYER !!! You cant afford to pay 10 or 20K for a oops sorry , At worst they will pay something to avoid the legal costs
My mom has COPD which she fails to mention when she gets health insurance when travelling. I know that if something happens when she’s away, her claim will be denied. All because she’s cheap and thinks no one will find out. Even though she has a prescription puffer. They will ALWAYS find out.
Sorry for your loss. Im going to ask some questions to gather some info as I have worked in the industry. What bank, how long did they have the coverage active (ie how long were they paying premiums) did they recently refinance or have similar coverage with the same bank prior to this mortgage and has your mom called the appeal # on the decline letter? Also you may at the very least get a refund for the insurance premiums. How is the rest of your mom’s banking relationship with the bank? Did your dad specifically not disclose the known health problem or was it there were signs around the time of application?
If they’re claiming the policy to be invalid, you should ask for all your premiums back. Either you paid for coverage or you didn’t. Also get a lawyer. Lots of insurance companies default position is to refuse all claims.
Sorry to hear about your mom’s ordeal.
Buying mortgage insurance from the lender is a bad idea. You answer a few brief questions, check a couple boxes…and you’re done…no you’re not.
These type of insurance is post mortem underwriting…they underwrite the file after the loss occurs. Easy for the insurer to deny since the insured is…dead. Such a scam.
Buy mortgage insurance through a life insurance contract, where the beneficiary is you, not the bank. Once these policies are issued, it’s a done deal(unless you lied on the application of course)
If she was paid $120k life insurance, she should be good for a little while.
Undisclosed pre existing health conditions will definitely prompt the insurer to deny the claim without a doubt. No need to appeal, that’s what underwriting is for and he failed to mention his illness, you are 100% not winning that appeal.
I would not suggest you postpone education, that what loans and grants are for. You’d most definitely have extra left over and can use that money to help your mom and sister.
Look into refinancing the home if push comes to shove.
At best if he failed to disclose they Might refund the premiums paid or portion of they would not have approved coverage. That’s a big might and I’ve only seen that happen twice in 20 years. Your mom’s income of 100k should be able to support a mortgage of 350K and it might be a budgeting issue and as you’ve now graduated you may need to work at least part time to help your room and board. Your mom may be able to refinance to extend the amortization of the mortgage to help reduce the monthly payment as well.
OP, I would have a lawyer review the terms and their reason, mistakes are made. I would also request all premiums payed if they are not paying out the policy.
I would add to the other comments that it depends on how long you were covered for the mortgage insurance. Generally speaking, there is incontestability period