economics WHEN you hear the word “scam” what do you think of? Someone upgrading their jew- elry collection with one of Jane Stewart's “job creation grants”? Or perhaps that TV show pur- porting to marry someone to a “muld-millionaire”? What Dil bet you don't think of are some of the activities of our upstanding banks and trust companies. Well maybe vou should because these venerable inaticu- tions are selling insurance prod- ucts to their customers at prices which could get then classified as seams. True, they are not taking a for of money from any one client but over their miliions of cus- tomers, the total probably runs into hundreds of millions of dol- lars every year. Lam referring to the life insur- ance coverage thar the lending institutions try to tack onto your mortgage or your line of credit. For example one of the leading banks offers life insurance that would cost a person in the 46- to 50-year-old bracket $43 a month ($516) a year to cover a $100,000 mortgage. However on the internet at you can get an immedi- ate online quote of between $205 and $24] a year for Si00,000 of life insurance coverage tor that same age bracket. This coverage is with well known insurance companies such as The Canada Life Insurance Company, Equitable Life, Norwich Union etc. and is for 20-year term insur- ance, This is comparable to the bank’s mortgage life insurance product as it is basically term lite insurance Too. That's a difference of around $300 a year. Also note that if you are unfortunate enough to collect on the bank’s policy, the insur- ance only pays off the balance of your mortgage, which is declining every month. So in effect the banks are offering a decreasing term policy, although the premi- unis are not decreasing. Another disadvantage to tak- ing mortgage life insurance through yeur fending institution is that if you change companies you will have to ceapply for insur- ance coverage with your new lender. This could be a big prob- lem if you have had health prob- fems and even if you haven't your premiums will probably go up because you are older. However if you take a 10- or 20-year policy with an insurance company your premiums will be fixed. The banks and trust companies offer similar gold plated insur- ance coverage with their other lending products. For example the trust company a friend of mine deals with offers life insur- ance on her line of credit balance at $.72 per month for each $1,000 of coverage. Sea for exam- ple if your line of credit balance was $40,000, then your premiuny for this amount of coverage would be $28.80 per menth. However on the internet she can get $100,000 of term coverage for around $25.00 per month. The lending institutions wilt maintain that the life insurance coverage that they peddle is just an extra service that they are mak- ing available co their customers and nebody is being forced to take it. While chis may be truce, thes do make an effort to get people who are signing up for mortgages or loans to take the coverage. In fact the insurance is often part of the agreement and the customer specifically has to refuse it and sign for the refusal in order to avoid the coverage. When people are buying a home they have 3 Jot of things on their mind and they are usually under considerable stress. Hf the person they are dealiag with at the lending institution recom- Friday, March 3, 2000 —- North Shore News - NV-3 mends that they take life insur- ance coverage with their moct- gage they will often go along just out of information overload. The custumer might not be in a prop- er state of mind to think through whether or not he really needs the coverage and he probably isn’t aware that he is overpaying for this coverage. I personally take a pretty dim view of this way of doing busi- ness. The monthly cost of housing in the Vancouver area is exorbi- tant enough without having another $40 or $50 tacked onto it. I would also suggest that just because you have taken outa mortgage to buy a home doesn’t necessarily mean that you need additional lite insurance coverage. Glass houses THESE windows of Nerth Vancouver apartment buildings face south to capture the sun. True, with the mortgage you have a new, large liability bur you also have an offsetting asset in the form of your new home. { would strongly recommend that you just say no to any insur- ance products that the lending institution tries to sell to you. Then you should sit down and look at what your new monthly payments are, along with the other costs of maintaining your new home, and then decide whether or not you need more insurance coverage. If you do then vou can shop around to get the best available deal. — Trent Appelbe is a real estate agent and an economist with Re/Max Crest Realty. He can be reached at 988-4797 or by e-mail at .