Mortgage Insurance vs. Life Insurance – What am I Actually Covered For?
If you have ever purchased a home or applied for a loan, you may be familiar with Mortgage Insurance. This is the insurance the bank is obligated to encourage you to take in the event you die or become disabled. It is intended to protect your loved ones from being stuck with the mortgage in the event life takes a wrong turn ie. death. Sounds like a no brainer right? Wrong! There are MANY pitfalls with Mortgage Insurance that put the bank’s best interest ahead of yours for a price that’s not worth it.
Before you say yes to Mortgage Insurance, consider a solution designed to PROTECT YOU, YOUR HOME, & YOUR LOVED ONES – not your lender. This solution is Life Insurance.
Here are the FACTS that outline Mortgage Insurance vs. Life Insurance:
- With Mortgage Insurance, as you pay down your mortgage your coverage is reduced BUT the Mortgage Insurance Cost remains the same. With personally owned Life Insurance your coverage and cost are level throughout the term of the contract.
- With Mortgage Insurance the beneficiary is the bank ie. If you die, the bank uses the proceeds to pay off the mortgage. With Life Insurance YOU determine the beneficiary. This allows someone you determine to hold the cards and determine how best to pay-off the mortgage. For example they could choose to pay-off the outstanding mortgage with the Life Insurance proceeds and “pocket” the excess or to invest the proceeds and pay-off the mortgage with the interest generated. The long and short of it is, your loved ones are the beneficiary and NOT the bank.
- With Mortgage Insurance, underwriting is often done at time of claim. This means you really don’t know if you are covered until you make a claim. Life Insurance underwrites your policy before you are approved. This ensures an iron clad contract between you and Life Insurance carrier, removing uncertainty at the time of death.
- The term of mortgage insurance is the length of the mortgage. With personal insurance you determine the length of the term.
- With Mortgage Insurance you do not own the policy, the lender does. That means they can make changes to the overall coverage without your consent.
The bottom-line is that for comparable rates (often less expensive rates) Life Insurance offers you and your beneficiary(s) more options and flexibility.