Canadian Contractor

Contractors beware: Banks' line of credit insurance may not pay out on your death

Two recent stories in the media detailed how benefits were denied by TD Canada Trust on line of credit insurance programs

December 20, 2013
By Alec Caldwell
Alec Caldwell

Back in August, I wrote a “contractors beware” article about how mortgage insurance claims can be denied. Nothing has changed since then, but my “beware” now extends to include banks’ line of credit insurance. I’m sure many contractors out there carry a line of credit covered by bank insurance.

This second “beware” article was prompted by an article in the Toronto Star on Dec. 9, reporting that a couple’s line of credit insurance (purchased through TD Canada Trust) did not pay out the expected $97,500 on the death of the husband, due to brain cancer, in 2007.

The article said, “You may think you are protected once a policy is issued, but that is not the case.” This is because the insurance company will only check the details when you make a claim.

In my article from August this year I told you about the CBC’s consumer protection show Marketplace. Here the show’s reporter Erica Johnson said, “The bank staffers selling mortgage insurance are unlicensed and rarely trained to explain the details and legalities of those insurance products. The result is people who pay premiums and think they are covered, only to realize later that they are not. Check out that program here.

Both reporters tell the same story. Both cases involved TD Canada Trust – but other banks have the same policies in force. Banks seemingly want to take people’s money, let them think they are covered, then when someone dies, it’s only then that they decide to investigate the deceased’s prior health details.     

Given this sad stories in the media about insurance sold by banks, it’s worthwhile considering finding your own insurance, through a broker outside of the bank. Many independent brokers will work diligently on your behalf – and they are not employed by the insurance companies whose products they sell. You can easily cancel your existing bank insurance without penalty or repercussion. But before you do that, get new coverage in place first.

In the interests of full disclosure, we at CARAHS have our own independent, licensed insurance brokers. Our free diagnosis of an individual’s or company’s insurance coverage is available to members and nonmembers alike. Contact Monica for details at 1-866-366-2930 (toll free).

CARAHS is a non-profit organization for self-employed renovators, builders and home services.


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