If you’ve taken out a mortgage, chances are your lender offered you mortgage disability insurance, a type of creditor protection insurance that promises to cover your mortgage payments if you become disabled and unable to work. While this coverage can provide peace of mind, many policyholders are shocked when their claims are denied at the very moment they need support the most.
Mortgage disability insurance denials are more common than most people realize. The fine print in these policies often hides restrictive definitions of “disability,” vague exclusions, and technicalities that insurers rely on to deny claims.
What Is Mortgage Disability Insurance?
Mortgage disability insurance (also called mortgage protection insurance or creditor disability insurance) is a form of coverage often offered by banks or lenders when you take out a mortgage. The agreement is a simple one: if you become disabled due to illness or injury and can’t work, the insurance will make your mortgage payments for a specified period (usually up to 24 months).
Unlike traditional long-term disability policies purchased privately or through an employer, mortgage disability insurance is tied to your mortgage and issued by a financial institution or insurer in partnership with your lender. Coverage typically starts after a waiting period (often 60 or 90 days) and pays a fixed amount (usually equal to your monthly mortgage payment) directly to your lender.
Why Are Mortgage Disability Claims Denied?
Unfortunately, many people discover that these policies offer far less protection than expected. Common reasons for denied disability claims include:
- Pre-existing Condition Exclusions
Most mortgage disability policies contain pre-existing condition clauses that exclude coverage for any condition you had symptoms of, or received treatment for, within a certain window (often 6–12 months) before your policy started.
Even minor or unrelated health issues may be used to justify a denial of your claim.
- Definition of “Disability”
Insurers often apply a narrow definition of disability. Some policies require that you be totally disabled and unable to perform any occupation, not just your own. Others impose stricter “objective medical evidence” requirements than standard long-term disability policies.
- Insufficient Medical Documentation
If your doctor didn’t clearly document your functional limitations, or the insurer says your symptoms aren’t “severe enough,” your claim may be denied for lack of medical support, even if you are clearly unable to work.
- Administrative Issues
Claims can be denied for seemingly minor issues, such as incomplete forms, missed deadlines, or lack of follow-up documentation. These technicalities often become the insurance company’s excuse for avoiding paying benefits.
- Eligibility Disputes
Sometimes insurance companies argue that the coverage was never in force due to errors at the time of application, such as non-disclosure, misunderstanding of coverage start dates, or failure to meet underwriting requirements.
What Should You Do If Your Mortgage Disability Claim Is Denied?
If your claim has been denied, it’s important to act quickly and strategically. Here are the steps you should consider:
- Request a Copy of the Policy
Get a full copy of your insurance certificate or policy. This document outlines your rights, obligations, and the definitions the insurer will rely on. You’ll need it to assess whether the denial was justified.
- Request Written Reasons for the Denial
Insurers are required to provide written reasons explaining why your claim was denied. This document will often reference specific clauses and give you insight into the insurer’s rationale.
- Consult Your Doctor
Make sure your physician understands what the insurer is looking for. They may need to provide additional details on your limitations, your inability to work, and how your condition fits within the policy’s definition of disability. Having your doctor on your side can be the most effective way of getting the benefits you are entitled to.
- Do Not Appeal Blindly
Insurers often encourage you to “appeal” the decision internally, but this process is stacked in their favour. In many cases, it’s best to consult an experienced insurance denial lawyer first, to avoid locking yourself into a process with limited legal leverage.
Experienced Insurance Denial Lawyers
At Taylor & Blair LLP, our experienced disability denial lawyers have extensive experience fighting insurance companies on behalf of clients across British Columbia. If your mortgage disability claim was denied, contact us today for a free consultation and let us help you get the coverage you were promised.