For mortgage insurance you as a Consumer have two choices:

1. Take out mortgage insurance through the financial institution providing the mortgage
2. Apply for term life insurance through an insurance company

Although it seems very simple and convenient to simply sign up for mortgage insurance from your lender and add this additional cost to your mortgage payment it is in your best interest to check out your other options and learn about the difference between mortgage insurance and individual insurance policies.

OPTION 1: Mortgage Insurance Through The Financial Institution Who Holds the Mortgage

TYPICAL ADVANTAGES:

1) QUICK & EASY: generally the medical underwriting is less stringent and the coverage can be approved quickly. In most cases no medical exam is required, however it is possible to be declined.
2) CONVENIENT: insurance premiums included with your mortgage payment
3) EASY TO BUDGET: premium rates do not increase due to age during the life of your existing mortgage as long as your balance does not increase

TYPICAL DISADVANTAGES:

1) LACK OF CONROL: the lender owns the policy and you have no control over it
2) LENDER IS THE BENEFICIARY: death benefit is automatically use to pay off the mortgage, regardless of the wishes of your family
3) BENEFIT DECREASES: as your mortgage becomes less the insurance coverage decreases
4) MAY BE DIFFICULT TO CHANGE LENDERS: if you wish to move your
Mortgage to a different provider you won't be able to take the mortgage insurance protection with you
5) PREMIUMS CAN INCREASE: the lender can decide to raise the premiums
6) IF ILL COULD LOSE COVERAGE: if you become terminally ill and cannot afford your mortgage payments you will lose your insurance coverage and no death benefit will be paid
7) ONE DEATH BENEFIT PAID: in the event of a common disaster only the mortgage balance outstanding will be paid

OPTION 2: Apply for Term Life Insurance Through an Insurance Company

TYPICAL ADVANTAGES:

1) GREATER CONTROL: you own the policy and you can appoint the beneficiary who will determine how the death benefit is used
2) CAN CHANGE BENEFICIARY: you can change the beneficiary anytime if you have elected a revocable beneficiary
3) NOT LINKED TO LENDER: if you want to change your mortgage provider the insurance protection is separate from the lender
4) CONVERSION OPTIONS: you can select a policy that has a conversion option that will grant you the option of changing the coverage to permanent protection in the future regardless of health
5) COVERAGE LEVEL VERSATILE: you can purchase any amount of coverage and add or decrease coverage at anytime
6) PREMIUM GUARANTEE: you can select a policy that has guaranteed premiums
7) ADDITIONAL PROTECTION IF BECOME ILL: if you become terminally ill and can't pay your mortgage payments but can still make the insurance payments you policy will pay the death benefit
8) BENEFIT REMAINS LEVEL: death benefit does not increase as mortgage decreases unless you request the coverage to be decreased
9) POSSIBILITY OF TWO DEATH BENEFITS PAID: if you elect to cover both yourself and spouse then both death benefits will be paid out in the event of a common disaster

TYPICAL DISADVANTAGES:

1) MEDICALLY UNDERWRITTEN: in most cases you will have to go through medical underwriting and be approved which sometimes may take a period of time and you could be declined
2) PREMIUMS INCREASE AS YOU GET OLDER: depending on the type of policy you select, for instance 10 year term the premiums will increase at certain predetermined intervals, this will be outlined in the contract

Contact us today to help you make an educated decision based on your unique situation before you sign up for mortgage insurance through your lender!

This material is for information purposes only and should not be construed as legal or tax advice. Every effort has been made to ensure its accuracy, but errors and omissions are possible.

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