Manulife Bank Advantage Account

Manulife Bank

/in , /by

Manulife Bank

This might be the most useful savings account in Canada

A 131-year-old insurance company has out-innovated everyone in making savings accounts more useful for everyday banking.

New and nimble financial technology companies – fintech – have brought some cool products to personal finance. But the Manulife Advantage Account, offered through the banking division of insurer Manulife Financial Corp., shows there are still some flickers of creativity in the old guard of financial services.

The Advantage account fills a gap for people who bank online and want to park their savings in an account that provides both a decent rate of interest and some utility for paying bills and accessing cash.

Keep a minimum of $1,000 in the Advantage account and you can do unlimited banking for free. Among the included transactions are debits, Interac e-transfers and withdrawals through 3,700 ATMs in the Manulife and Exchange networks.

The Advantage account is technically savvy, too. With paperless account opening, you can get an account up and running on your mobile phone or tablet without mailing anything. There’s also a mobile app that allows you to log in using your phone’s fingerprint reader as a password replacement, and to deposit cheques by photographing them.

The Advantage account was relaunched in February as part of Manulife Bank’s push to raise its rather modest profile. “Manulife Bank is banking’s best-kept secret in Canada,” CEO Rick Lunny said in an interview. “Frankly, I don’t think too many Canadians have even heard of us.”

Manulife Bank started out 25 years ago as something that Manulife Financial’s adviser network could offer to clients. Until now, the bank’s singular contribution to personal finance has been Manulife One, a combined mortgage and chequing account. The benefit here is that cash in your account — say, your paycheque — counts against your mortgage debt and thereby helps cut your interest costs. The Manulife One account also functions as a line of credit that lets you re-borrow what you paid down on your mortgage.

Manulife Advantage looks especially sharp in comparison to what the online banks Tangerine (owned by Bank of Nova Scotia) and Simplii Financial (owned by Canadian Imperial Bank of Commerce) have to offer. Both offer separate no-fee chequing accounts, which means there’s an intermediate step before paying bills or making purchases.

Manulife Advantage lacks the fintech halo of uniqueness, but it has something that is arguably better in the form of brand recognition for the Manulife name. Mr. Lunny said one in three Canadians already has a relationship with Manulife Financial through its insurance products or its group benefits and retirement plans in the workplace. “When you’re a startup, you don’t have that sort of trust and loyalty,” he said.

Whether or not you’ve tried a fintech app, you owe these scrappy upstarts some thanks. The threat they pose is motivating the old guard of personal finance to up their game and offer useful innovations like Manulife Advantage.

For more information about Manulife’s Advantage Bank account click here.

Originally published April 19, 2018, by Rob Carrick, personal finance columnist

Solutions Banking All-in-One

Banks sell mortgage insurance, but independent experts say you shouldn’t buy it

/in , , /by

A woman helps a girl ride a bike in front of a house in Brampton, On. on May 20, 2017.

Personal finance experts are a pretty soft-spoken bunch. It isn’t often that they say they would “never ever” advise buying a certain financial product.

But that is exactly what they generally say when asked about mortgage protection insurance, according to Anne Marie Thomas of InsuranceHotline.com, an insurance comparisons site.

Mortgage protection insurance isn’t the mortgage insurance most Canadians are familiar with, the one you need to buy, generally from the Canada Mortgage and Housing Corp. (CMHC), when your down payment is less than 20 per cent of the value of your home.

Unlike the better-known mortgage insurance, which protects lenders if homeowners default, mortgage protection insurance is, essentially, a type of life insurance. It covers your mortgage debt if you die or become disabled.

Banks generally try to sell homeowners this type of insurance when they sign up for a new mortgage. Insurance premiums are then seamlessly added to their monthly mortgage payments.

So, what’s not to like about that?

A lot, according to Thomas:

1. The payout from mortgage protection insurance shrinks with your mortgage

These kinds of policies only cover your outstanding debt, meaning the payout gets smaller and smaller as you pay off your mortgage. Insurance premiums, on the other hand, stay the same through the insurance term.

2. You may find out when you file a claim that you aren’t eligible for coverage

Mortgage insurance policies are “typically underwritten after the fact,” noted Thomas. This means that the insurance company will only take a close look at your case once you file a claim. And it may very well find that something in your particular situation violates the insurance contract, which would leave your family without coverage just when they need it most.

If you purchased mortgage protection insurance, comb through your policy carefully to make sure there’s nothing that could potentially exclude you for coverage, advised Thomas.

3. Your might get saddled with higher premiums when you renew your policy

With mortgage protection insurance, you’ll need to renew your policy at the end of your mortgage term, said Thomas.

Your new premium will be based on your — now smaller — outstanding mortgage balance, but that doesn’t mean you’ll be paying less. Because you’re a bit older, your premium won’t necessarily go down — in fact, it may go up, Thomas said.

4. Your bank, not your family, pockets the payout

Assuming the claim goes through, mortgage insurance guarantees your family won’t have to worry about mortgage payments if you die or become disabled.

In case of death, your beneficiaries can counts on a lump-sum payout that will take care of the outstanding balance, according to Jason Heath of Objective Financial Partners, a fee-only financial planning firm. In case of disability, the policy will generally cover your monthly mortgage payments until the debt is extinguished, he added.

But does it make sense to use the money to pay off the mortgage?

Not necessarily, said Heath. Perhaps your survivors could have easily eliminated mortgage by selling the house. Or they might have preferred to use the money for other purposes, while keeping up with your mortgage payments.

Mortgage protection insurance means any payout will flow out to your mortgage lender, not to you or your family, noted Thomas. And that’s much like CHMC insurance.

Consider plain life insurance instead

Skipping on mortgage protection insurance doesn’t mean you have to go without coverage. Instead, you could buy life insurance, both Thomas and Heath said.

With life insurance, your payout remains the same through the term of the policy and the money comes with no strings attached.

For example, if you had a $300,000 mortgage and took out a policy for the same amount, your beneficiaries would still receive $300,000 even if you had paid down your mortgage in full by the time the claim is filed.

And life insurance is generally much cheaper, too, said Thomas.

“It typically could end up costing you half as much,” she said.

Why does anyone get mortgage protection insurance, then?

Many homebuyers, especially those buying their first home, haven’t done enough research to know what they’re getting into, said Thomas.

“Generally, the way it’s offered to [homebuyers] is when they’re sitting there, signing a whole bunch of [mortgage] paperwork and they’re bored and they’re starting at the wall,” said Heath.

When the bank proposes adding mortgage protection insurance, “for most people, it’s a five-second decision.”

Banking and mortgage industry professionals are often under enormous pressure to sell mortgage insurance, and benefit handsomely through commissions when they do, said Heath.

“Your friendly neighbourhood banker is financially motivated to get you to buy mortgage insurance, whether it’s in your best interest or not,” he added.

That may be why, a few years back, Heath himself discovered in his first-ever mortgage statement that he was, in fact, paying for mortgage protection insurance even if he had clearly declined coverage.

Heath eventually got his lender to cancel the policy and refund the premiums.

But many homebuyers aren’t well-informed enough to know they shouldn’t have signed up for the service in the first place.

“Mortgage [protection] insurance is very expensive, but it’s a captive market,” said Heath.