Do You Know These Shocking Facts About Mortgage Insurance?
Term Life Insurance Is A Better Choice – There are very BIG Differences!
Congratulations!! You may have just renewed your mortgage, been approved for a new mortgage or you’re refinancing. In each of these cases, the lender is going to ask you if you would like to protect your home with Mortgage Life Insurance. Why wouldn’t you? It’s a simple check in the accept box or in the decline box. Why would you decline the opportunity to protect your beautiful home?
If you knew what we’re about to tell you, you would definitely be putting a checkmark in the decline box instead!
Unfortunately, most people are not given the correct information about the Mortgage Life Insurance that’s being offered to them. Mortgage lenders usually make it seem that getting the insurance that they offer is mandatory. Well, we have news for you, it is not mandatory!
Don’t make the costly mistake of rushing the Life Insurance decision. You spent a lot of time looking for the right home and finding the best mortgage rate. And we want to make sure that your Mortgage/Life Insurance Death Benefit (the amount paid to the beneficiary of the Life Insurance Policy), is paid to the right people, should you pass away.
Eleven years ago, the CBC Marketplace filmed an episode on Mortgage Insurance vs Life Insurance, called “In Denial”. It explains exactly why Mortgage Life Insurance is not the right product to protect you and your family. We have been sharing this important video with our clients since it aired, so please take a few minutes to watch it, as it really is eye-opening!
As you saw in the video, Term Life Insurance is a better product, however, your bank or mortgage lenders don’t usually talk about this option.
Did you know that buying Life Insurance is one of the most unselfish things you can do? We’d like to outline these two types of life insurance products and describe their main differences:
- MORTGAGE LIFE INSURANCE is a type of Life Insurance offered by your bank/mortgage lender, which only covers your mortgage debt in the event of your passing, IF YOU QUALIFY!
- TERM LIFE INSURANCE is sold by a licensed Life Insurance professional that works with Life Insurance Companies. It covers you for a set period of time (term), such as 10, 15, 20, 30 or 35 years and is designed to protect your family in the event of your passing. They can use this Life Insurance for anything, not only to pay off your mortgage or part of the mortgage, but they can also pay off other debts, final expenses and fund your children’s education.
It is important to make sure you have enough Life Insurance so that it would replace your income and your family would have enough money for their future. There are many options of what to do with the money (death benefit) from a Term Life Insurance policy.
These are the main differences
UNDERWRITING (QUALIFYING)
Underwriting for mortgage insurance is only done when and if there is a claim. That’s referred to in the industry as Post Claim Underwriting. What this means is that the person(s) who is buying & paying for the mortgage life insurance may not actually be insured. However, their family will find out if they were insured, after they have passed away and a claim has been submitted. Did you know that when you complete the questionnaire, you are only qualified to pay the premiums but you may not actually be insured? Yes, it’s possible! This gives you a false sense of security.
Term Life insurance by contrast is underwritten when you purchase the policy. That’s why you will answer medical questions and possibly be asked for a blood or urine test to determine that you will actually be insured. When a Term Life Insurance policy is issued, you know that if you were to pass away, the insurance company will pay the death benefit (the amount paid to the beneficiary of the Life Insurance policy). Therefore, your family will be financially protected, if they have the right type and amount of Life Insurance.
Not having complete certainty about whether or not Mortgage Insurance will payout can really hang a cloud over your financial future. This is the key point of exactly what the CBC Marketplace’s video, “In Denial” is all about. It points out the shocking facts about mortgage insurance.
BENEFICIARY
With Mortgage Life Insurance if you were to pass away, did you know the mortgage death benefit is paid directly to your bank or mortgage lender, as they are the beneficiary, not your family? Don’t forget, that’s only if you qualify! Therefore, you have no guarantee that your mortgage will be paid.
Term Life Insurance is owned by you and you have total control over who your beneficiary will be and they will be receiving the death benefit. Your beneficiary has the flexibility to choose where the money goes. For example, they can pay off debts, reduce the mortgage and secure their future.
COST & COVERAGE
With Mortgage Life Insurance, every time you renew your mortgage, you have to renew your Mortgage Insurance. The problem is, you are now older, you are more of a risk and you could have health issues, so you will pay a higher premium. This is one of the shocking facts about mortgage insurance.
Additionally, as the years go by and you pay down your mortgage, your outstanding mortgage balance decreases, however you continue to pay the increased premiums.
With Term Life Insurance, after you decide how much coverage you need to protect your family and you signed up for a 20 or 30 year term life insurance policy, you don’t have to do anything beyond continuing to pay for your monthly premiums. Your premiums and the death benefit remain the same for the length of the term. By the way, Life Insurance costs a lot less when you are young and healthy.
PORTABILITY
Mortgage Life Insurance is not portable. If you change mortgage lenders, you have to apply for new Mortgage Insurance when you are applying for a new mortgage.
Term Life Insurance is always portable. Whether, you change mortgage lenders or not, your Life Insurance policy always stays with you. Life insurance protects everything that you want it to, whereas Mortgage Life Insurance only protects your home but not anything beyond that. Therefore, you can switch lenders without worrying about your health diminishing or having to prequalify.
These are just 4 of the major differences between Mortgage Life Insurance and Term Life Insurance. Mortgage Life Insurance is convenient because it is easy to apply for, when you are getting a mortgage, however most lenders are not licensed life insurance professionals and cannot provide you with all the facts, therefore, you cannot make an informed decision.
Term Life Insurance is a much better option for most people as it provides better coverage, more flexibility, is less expensive and provides peace of mind to protect your loved ones, if God forbid something should happen to you.
Most people don’t know these shocking facts about mortgage insurance.
Don’t forget, Life Insurance is the most unselfish purchase you can make because it’s not for you, it’s to protect those you love. It’s an extremely important financial tool as it is the core foundation of your Financial House.
If you are one of the many people that are paying for Mortgage Life Insurance without realizing the difference, let us help you.
Please call one of the Financial Architects at the Blackmore Levy Group at 1.888.520.6520 or connect with us via email for a FREE Audit of your Financial House. This is a private and non-judgemental consultation.
If you want to help your friends, share this blog post so they understand the shocking facts about mortgage insurance. Your friends will thank you!
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