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Whether you're buying a home for the first time, or refinancing an existing mortgage, someone has probably suggested you purchase mortgage life insurance. But don't rush into buying a policy until you've looked at all the possibilities. You could end up saving money and getting added life insurance coverage at the same time by purchasing a term life insurance policy instead.
Don’t let the wording fool you! Mortgage insurance is really just life insurance. Your mortgage insurance provider may require that you obtain life insurance as part of your mortgage transaction; however, under no circumstances are you required to purchase insurance provided by your lender.
There are two ways to insure your mortgage: With either individual or group mortgage insurance through your mortgage lender.
Never sign up for mortgage insurance with your financial institution at the same time that you're signing the mortgage documents! Examine the chart below and see the difference.
Bank, Credit Union or Trust Co. (Mortgage Insuance) |
Your Personal Plan (Term Life Mortgage Insurance) |
You are covered under a group policy owned by the Mortgage Company. They control the coverage you receive. |
You own the policy. |
The policy may be cancelled by the lender or insurer at any time |
Your plan cannot be cancelled, except by you. |
Mortgage coverage is decreasing term insurance where the premiums remain level while your mortgage reduces. |
Purchase any kind of insurance (either term or permanent) and any amount of coverage you require. |
Only the outstanding balance of mortgage is paid upon death of the insured. |
Full policy is paid to beneficiary upon death of the insured for use as they see fit. |
Generally, no distinction is made between smokers and non-smokers. Non-smokers and healthy individuals are penalized with higher premiums! |
Your rates will vary depending no your health and smoker status. Non-smokers receive lower rates. |
You may be required to re-qualify upon renewal of your mortgage. |
You never have to re-qualify for coverage. |
In most cases, if you take your mortgage to another company, you lose your protection. You must then submit satisfactory evidence of health and are subject to the current rate charged by the new mortgagor. |
Your policy is portable. If you transfer your mortgage to another company, your insurance remains in force - no need to re-apply and prove your insurability. You are protected from the danger of losing your insurance because of a change in your health. |
The proceeds are payable to the Mortgage company. In the event of death, the company is automatically repaid. |
You appoint a beneficiary who can use the proceeds in whatever manner he/she wishes. If it is wiser to invest the proceeds rather that pay off a low interest mortgage, the beneficiary has the choice. |
Most companies restrict mortgage insurance to clients age 65 or younger, with coverage terminating at age 70, thereby restricting your options for retirement living. |
Policies are available up to ages 70 for term, 80 for special term and 85 for Universal Life. |
Policy is underwritten after death! Health checks are very minimal. You are not 100% guaranteed to receive the proceeds. |
Your policy is underwritten before you are approved. You obtain peace of mind knowing you can safely make your expensive home purchase. |
Most loan officers are not licensed to be insurance agents. They cannot, by law, provide you with insurance advice as they are not trained or qualified. |
A Licensed and trained mortgage insurance specialist will help you determine your options, including what will work best for you and your family. |
See the difference? Make your choice today!
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Copyright (c) 2008 Benefits BC. All rights reserved.
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