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Mortgage insurance - apply for personal insurance instead
Category :- Insurance

Author :- Art Smith 
* Please rate and share the article if you find it interesting *

Posted on June 23, 2014, 2:17 am
(2 Ratings)

Insurance is an important part of the financial planning process and it should not be disregarded.

Always consult an experienced insurance advisor, do not leave this subject ‘for another day’.

You can have as many life insurance contracts as you want. However, it is cheaper to have one insurance policy with coverage of, for example, 150K than three policies with coverage of 50K each, due to administration costs of each policy.

If you need life insurance, get it from an insurance company, do not take it with your mortgage. Here is why:

1. Mortgage life insurance is not portable: if you switch to another mortgage lender you have to qualify for new mortgage insurance (which will be most likely more expensive due to your age and new health condition and issues). In some cases you might not qualify at all. This reason alone keeps many borrowers with the same mortgage lender.

2. The beneficiary is always the mortgage provider. Your family will not get a dime when you pass away. Do you want to leave your family without insurance?

3. The policy is always owned by the mortgage lender and the premiums you pay are not guaranteed.

If the lender decides to cancel your policy or to increase the premiums s/he can do that at any time. There is nothing you can do about it.

4. Most people do not know that underwriting on a typical mortgage insurance claim is done after the fact. In other words, the insurance company will look into the medical history of the deceased to see if there could be any reasons for denying the claim, to begin with. In the case of personal insurance, underwriting is done beforehand, therefore an insurance claim cannot be denied later on (unless there is a fraud involved).

5. You pay the same premiums all the time but the coverage decreases (as you pay off your mortgage). It is not the case with personal life insurance.

6. You are no longer covered once your mortgage has been paid off. In other words, your mortgage life insurance is always temporary.

7. Mortgage life insurance does not have additional options (riders) which personal life insurance does.

8. You can only qualify for standard rates, i.e. there is no way to get a better deal if your health is excellent (which happens rarely nowadays).

Of course, if you do not have ANY life insurance, mortgage life insurance is better than nothing. If you qualify you should get personal life insurance. Do not cancel your mortgage life insurance before you are approved for personal one.


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