A lot of time and effort goes into shopping for your dream home. You also probably spent a considerable amount of time shopping the market for the best mortgage rate available. Once you made your final decision, the lender offered you Mortgage Insurance to protect your most prized asset. On the surface it seems like a good idea, protecting your loved ones against unforeseen illness or premature death is a prudent decision. You can even tack the monthly premiums onto your mortgage payment for one simple withdraw each month.
But before you agree to Mortgage Insurance through a lender, you should explore your options. Protecting your mortgage with an individually-owned Term Life Insurance policy will provide better value and more flexibility – usually, at a lower cost.
Mortgage Insurance or Term Life Insurance?
|Mortgage Insurance||Term Life Insurance|
|Coverage Amount||The coverage amount on a Mortgage Insurance policy with a lender declines as your mortgage balance declines||The coverage amount on an individually-owned Term Insurance policy remains the same, even as your mortgage balance decreases|
|Beneficiary||Mortgage Insurance through your lender names the bank as beneficiary if you pass away||An individually-owned Term Insurance policy allows you to choose your own beneficiary|
|Policy Owner||Mortgage Insurance through a lender is not portable – the policy is owned by the lender||A Term Insurance policy is owned by you – you keep it if you switch lenders, pay off your mortgage or move to a new home|
|Premium Stability||With Mortgage Insurance, your coverage and rates may not be guaranteed||With an individually-owned Term Insurance policy your coverage and rates are locked in|
|Conversion||Mortgage Insurance through a lender is not convertible to a permanent insurance policy||An individually-owned Term Insurance policy through an insurance carrier is convertible to a permanent policy without a medical exam – providing lifetime protection|
|Underwriting||Mortgage Insurance through your lender is most likely underwritten at claim time. Pre-existing conditions can negatively impact your lender’s decision to either approve or deny your claim||An individually-owned Term Insurance policy is underwritten at time of application. Evidence of insurability is established before you choose to proceed with your coverage.|
To learn more about the differences between Mortgage Insurance and Term Life Insurance, read the article below: