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 MORTGAGE INSURANCE : Should You Buy Direct Or From The Bank? |
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Some banks may give you the option to participate in their programs.
Unless you are in terrible health and there are no ways for you qualify
for a regular policy, this is not a good choice. See why in the
table below :
Option One
Buying Through Life Insurance Company
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Option Two
Buying Through a Bank or Trust Company
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The
policy is your own individual policy.
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The
coverage is under a group policy.
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You
own the policy - you have complete control over it.
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The
bank owns the policy - you have no control over it.
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You
have a premium rate that is guaranteed in advance, the insurance
company cannot decide to change it.
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The
group policy premiums can be changed if the company decides to raise
premiums for the group.
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You
may purchase any amount of coverage. You have flexibility
to add the coverage your insurance plan.
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The
coverage is for the outstanding amount of the debt. As your
mortgage reduces, your insurance decreases. NO CONTROL.
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The
insurance company cannot cancel your insurance, only you
can (assuming you pay required premiums.)
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The
policy can be cancelled by the bank or by the issuing company.
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Your
individual policy is fully portable. It is not connected to
the mortgage and if you re-finance your mortgage with another bank,
you do not need to re-qualify.
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The
coverage will terminate if you re-finance your mortgage, or if you
sell your house, or if you pay off your mortgage, or if the bank
forecloses on your mortgage.
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You
can convert this policy, regardless of your health.
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The
group mortgage policy is not convertible.
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You
decide who your beneficiary is. Upon death your beneficiary will
receive the proceeds and your beneficiary decides how and where
to use those funds. The proceeds of a life policy are protected
from all creditors, including a bank.
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The
bank is your beneficiary and the death benefit is automatically
used to pay off the mortgage, regardless of the wishes or circumstances
of your dependents.
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If
you use level term, and insure both the husband and wife individually
(our recommendation) then both policies pay benefits in the event
of both deaths (it is also more cost effective.)
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If
you and your spouse are both insured on a bank mortgage policy,
then only one payment is made in the event of both deaths.
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You
are buying the coverage from a licensed broker or agent who
has many years of training to understand your overall need for life
insurance and how to integrate that with your total need.
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You
are buying insurance from a bank employee who is not licensed
and who receives no training in your total need for life insurance.
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If
you become terminally sick, and are laid off work, and are not able
to make your mortgage payments, but you are able to make your insurance
premium, your policy will pay the death claim.
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If
you become terminally sick, and are laid off work, and are not
able to make your mortgage payments then you automatically lose
your insurance along with your house at a time when you desperately
need it to protect your family.
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Conclusion
Even if the cost of individual life insurance coverage was higher
than that offered by the bank or trust company, it is clear that individual
life policies are superior and worth the difference. However, as
most consumers are usually surprised to learn, you often end up
paying the bank more than what you would pay if you purchased directly
from the life company.
Mortgage Life Insurance
Through a Lender. Is it worth it?
From Money Management Newsletter
How often do we
review our monthly expenses - $40 for cable, $87 to the phone company
- you get the picture - lots of small items to pay and the bank charging
on each transaction to boot!
One just payment
is the mortgage life insurance premium, that sometimes is hiding besides
your Mortgage payment.
As you know, mortgage
life insurance pays off your mortgage in the event you die, and may cost
up to $50 a month per $100,000 of mortgage principal. After 15 years,
you've paid regular monthly insurance premiums and your mortgage may be
down to $25,000. That monthly premium now will generate a relatively small
payout to your heirs, plus you've lost the opportunity to invest that
premium money.
You may be better
off buying a mortgage term life insurance policy for $100,000 and your
heirs will receive the full amount, not just the mortgage balance. Or,
make monthly extra mortgage payments with your money and save on mortgage
interest.
Ask lots of questions,
compare the costs of insurance products, and calculate how much mortgage
interest you would save in order to make the best choice. Receive a quote
for our cash back mortgage paydown option or our very low priced term
plans.
Please, DO NOT confuse PMI
(Private Mortgage Insurance)
with mortgage life insurance. They are two VERY different plans.
Receive Your Free Mortgage Insurance Quote
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