Mortgage Insurance

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.

 

Mortgage Insurance Through Banks


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. POST UNDERWRITING: determination of if you qualified is normally done after the event of death and not at application time which determined with the other options in the life insurance industry.