Your mortgage application has just been approved. The bank then asks if you’d like insurance. Understanding this could be a huge debt to take on if the worst were to happen, many people say yes right away.

Once you sign on that dotted line, you breathe a sigh of relief knowing that you are covered as long as the premiums are paid, right? Not so fast. If you’ve just purchased your insurance through the bank, your coverage is not guaranteed at all.

Even if you don’t want insurance, many banks require you to have it (unless you put down more than 20%). Many people don’t realize that policy options are available from outside the bank, and why policies through independent insurance advisors are almost always better for you and your family.

One of the biggest differences between credit-life and mortgage-life insurance comes after you make a claim, and this difference is something you should care about.

Almost every type of individual insurance on the market uses pre-claim underwriting to examine your health and medical history before you start paying your premiums. Once you are approved, your coverage is 100% guaranteed.

But if you’ve purchased credit-life insurance through the bank, here’s the scary part. The bank will usually only provide post-claim underwriting. That means the bank determines if you’re eligible for insurance only AFTER death, not before. After a claim is made, if they determine for any reason you weren’t insurable at the time of your death, they might not pay out your claim.

There is NO guarantee you will be paid out, no matter how long you’ve been paying premiums.