Is your mortgage insurance really protecting you?

Is your mortgage insurance really protecting you?

When you bought your new home, you may have signed up for mortgage insurance on the loan. What you really got was ‘Lenders’ mortgage insurance. This type of insurance is designed to protect the bank more than it protects you. There are numerous loopholes and conditions with this type of policy.

This kind of insurance is owned by the bank, not by you. It is designed for the lender’s benefit, and you are not getting the specific, individual coverage you may need for your circumstance. It’s also not transferable. If you change lenders, you will need a new policy and all the hassles of doing that paperwork again.

Life insurance, offered by insurance companies, is a smarter strategy. It gives you better value because your policy’s coverage stays at the same level while your mortgage is paid off. In contrast, lender’s mortgage insurance offers declining coverage as you pay down your mortgage, but your premiums stay the same.

Lender’s mortgage insurance will pay off your mortgage in case of death. However, your own life insurance will allow more flexibility about how this is accomplished. Maybe you need some funds to pay for the funeral? Maybe the mortgage has been paid down and there is excess coverage? With life insurance, that excess coverage is paid to your beneficiaries. A lender’s mortgage insurance policy will only ever cover the amount of the mortgage that you still owe.

With lender’s mortgage insurance, you must undergo a health evaluation every time you renew your mortgage. What if your health has changed? You may be denied coverage. You also do not enjoy a preferred rate for being young and healthy now. As well, the older you are, the higher your premiums will be.

With life insurance, you can enjoy guaranteed premiums and continuous coverage—no lapses during renewal time, no need to renew paperwork, and the comfort of knowing that what you purchased is exactly what you need. It gives you peace of mind.

Life insurance is much more flexible and powerful than mortgage insurance. It protects you as your life changes, your health changes, and your prosperity grows, as you purchase a bigger home, and as you age to the point where you might want to leave a legacy for your family. All of this is possible with life insurance. You have tremendous flexibility, and you are in complete control.

You and your Financial Advisor will work together to review your options and determine the insurance that works best for you. Talk to your Financial Advisor about how life insurance will better protect your mortgage and provide you with the best solution.

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