The insurance business is based on a binding contract between the insurer and the insured. You are quite right that some insurers will pay out claims when they could technically find a valid cause not to. But I would contend that this is based not on a concern about “trust” or “doing the right thing”. It is based on a pretty straight forward calculation on whether their cost to fight a particular claim is worth more than just paying it.

None of this is relevant to whether mortgage life insurance is a good idea or the particulars of this case. But I just don’t think it is correct or wise to spread the idea that “doing the right thing” when it is not what is stipulated in the contract is common practice in the insurance industry.

That said, Felix left out the extremely important fact that the death was a suicide. The norm is that life insurance policies – not just mortgage life insurance policies, but “standard” term and whole life policies – have exclusions for suicide for 2 years after the policy is written. I think mortgage life insurance is a poor purchase because of high pricing relative to standard term policies. Marketing letters that I’ve received for it have struck me sort of shady, but I have no issue with a suicide exclusion on the policy. While I’m sympathetic to her difficult situation, a suicide exclusion for a period after a policy is written isn’t some fine print clause that’s only there in a shady corner of the life insurance market. It’s pretty much necessary in some form to keep the life insurance market functioning as intended.

Here’s a brief overview of the topic -http://www.bankrate.com/finance/insuran ce/protecting-life-insurance-policy-clai ms-1.aspx

This video is about the ‘right and wrong’ about the whole mortgage insurance business. The selling of these policies has already been shown to be quite dodgy. I suspect we will see another Huff Post follow-up to this video, and we will have a chance to find some more facts about the policy. Ultimately, this is about trust, and doing the right thing.

Insurance is a business based on trust. If you have ever called in a claim on a policy, you know the scared feeling that goes through your head ‘is this really covered?’… ‘did I invalidate my policy somehow accidentally’… ‘is there something in the small print that will keep them from paying?’ And hopefully, you also know the relief when the claims department doesn’t seem overly extreme looking for a ‘get out’, they confirm that the loss has happened, and pay… that’s how it’s supposed to work.

It is written into the DNA of the insurance bus that there is a balance between protecting profits, and keeping customer trust. With enough effort many claims can be avoided by looking hard at the small print, but the fact is if the policy was sold to cover an event, and the event happened, then the ‘right’ thing to do is pay out.

Perhaps as some have commented, there may be some loopholes in the term “mortgage insurance.” But at some point, products can not be sold with the intention of not actually providing any value. For instance, buried in the fine print, did this “policy” have a clause that it only pays out for deaths that occur in months that begin in a vowel, on an even day, in leap years?
When we have a system in which we call forgery “robosigning” we have reached the point of not just torturing the language, but going full inquisition.

Also, were there provisions that nullified the insurance in the case of suicide? Was she for sure the beneficiary? I’m definitely not saying she didn’t get screwed but there needs to be more information before the torches and pitchforks come out.

The powers that be refuse to prosecute the banks. Settlement is all they crave. What nonsense.