Mortgage Life Insurance vs. Traditional Individual Life Insurance
Four Key Reasons Individual Life Insurance May Be Preferable To Credit Mortgage Life Insurance
Unlike individual life insurance, credit insurance sold through a bank is usually not underwritten until a claim is made. This means the insurance company may determine you are not eligible for a payout even though you have been paying premiums. For instance, a claim may be denied because an investigation of your medical records indicates you once had high blood pressure or high cholesterol that you did not disclose.
When you apply for individual insurance through a licensed insurance broker your medical history will be examined before a policy is issued and you start paying premiums. The insurance broker will ask detailed questions and may arrange for a nurse to conduct a physical. You will know upfront whether or not you are covered.
2 Standard Premiums
The mortgage insurance policy sold at the bank is a one size fits all policy. This means everyone who qualifies is considered to be of equal risk. The premiums you pay on mortgage insurance are a fixed amount based on your age and the amount of your mortgage. There is no discount for non-smokers or for women. The premium does not reduce as the mortgage is paid down.
2 Individual Premiums
With an individual life insurance policy, the premiums you pay are based on your individual risk. Your health history and exam will help to determine how high or low your premiums are. Non-smokers and women pay a lower premium. The face amount of the coverage remains level.
The mortgage insurance sold at the bank covers a decreasing amount. While your premiums remain the same the amount left on your mortgage decreases. Mortgage insurance will only pay off the balance of your mortgage when you make a claim.
When you purchase an individual insurance policy you you pay premiums for a pre-determined amount of coverage. Therefore, if
you pay premiums for $100,000 of coverage your beneficiary will receive $100,000.
4The Bank Gets The Payout
Mortgage insurance is designed to pay off the bank if anything happens to you. Therefore the insurance payout will be made directly to the bank.
4You Choose Who Gets The Payout
With an individual policy you are free to choose the beneficiary or beneficiaries. If something happens to you, it is up to your beneficiaries to decide what to do with the insurance proceeds.
POINTS OF CONCERN: Most bank staffers selling mortgage insurance are unlicensed and rarely trained to explain the details and legalities of their mortgage insurance. The result is people who pay premiums and think they are covered, may end up realizing later that they are not. When it comes right down to it,” Your Best Insurance Is An Insurance Broker.” For more information, “Get In Touch With RSA Financial.”