TD Bank is running a major, country-wide promotion to sell critical illness insurance policies to their mortgage customers.
The basic idea here isn’t bad. If you got sick, you might need to take a break from work. Not working could make it difficult to keep up your mortgage payments. In such a scenario, critical illness insurance could pay you a tax-free benefit, usually in the tens or hundreds of thousands of dollars, to help you stay afloat.
If there’s one thing Canadian banks know how to do, it’s making money. One of their main tactics is to take something that’s essentially good, then make it overpriced and deficient in ways that make it more profitable, but at your expense.
This is one of those cases. Critical illness insurance is a good thing, but not the way TD Bank is doing it. What they’re offering is not full and proper critical illness insurance, but a special variation that’s only for mortgage holders. It’s not a good deal, and here are three reasons to say no:
Critical illness policies usually cover about 20 common illnesses. The TD Bank policy only covers three. So, if you go with TD and you experience a heart attack, stroke or cancer, you’re covered, but if you experience kidney failure, multiple sclerosis or a brain tumour, you’re out of luck. There’s no reason to make this compromise.
When you apply for critical illness insurance, the insurer usually does a medical exam. Healthier people pay less, and less healthy people pay more. TD uses a simplified questionnaire instead. Since this prevents them from understanding your situation in detail, you’ll be overcharged if you’re healthy and denied coverage if you aren’t.
You choose your home and mortgage based on your budget and lifestyle. You make your investment choices based on your retirement goals. Insurance also needs context. It should be part of a plan that determines the optimal amount of critical illness, disability, and life insurance. TD Bank does not offer you a plan. They only want to sell policies.
Critical illness insurance makes sense. When we create financial plans for people, it’s one of the first things we recommend. After all, being able to pay your bills and maintain your lifestyle through both sickness and health can be a major factor in your overall quality of life.
Ideally, you should work with a fee-for-service financial planner or a free online service like Planswell to determine what type and amount of coverage you actually need, and to make sure you don’t get ripped off. In the meanwhile, if you run across the TD Bank offer, just say thanks but no thanks.