When You Get It Right, Insurance Is Simple
There are 2 types of mortgage insurance:
- Creditors Group Insurance (Bank Offered Insurance)
- Personal Insurance
Creditor insurance is what most people refer to as bank mortgage insurance, but there is no such thing as bank mortgage insurance. The insurance that your bank is asking you to sign up for is actually not issued by the bank, it is issued by some other insurance company, and it is their rules you are playing by.
Major problems with creditor insurance:
- You may not have insurance!
The policy is not underwritten until someone puts in a claim at death. Only at that point does the creditor insurance company do its underwriting to decide whether they will accept you for insurance or not. Many times these companies have rejected claims.
Click Here to see: Shocking Inside Secrets of Bank Mortgage Insurance (CBC’s Marketplace)
- You are paying too much. You pay the same yearly premium as your mortgage keeps getting smaller with each payment.
- You may be paying more than you have to. Their yearly renewable term insurance keeps getting more expensive each year.
- You are probably not getting your discount for being a non-smoker.
- You are probably not getting your discount for being in good health.
- You are probably not getting your discount for a good family history.
- You can’t take their mortgage insurance with you, it’s not portable. So when your mortgage comes due and you want to shop around for a better mortgage rate you must reapply at the new place to see if you qualify to pay insurance premiums there but if your health has declined they may not accept you to pay premiums. You will now be paying higher rates based on your increased age.
- No flexibility or control. You don’t own the policy; you’re just a certificate holder. They keep control, and they can even make changes without your consent. You’re not allowed to reduce your coverage, you’re not allowed to convert to permanent insurance, and you’re not allowed to continue your insurance when your mortgage is paid off.
- If insurance proceeds are paid out they only go to the bank to pay off the remaining mortgage amount. They will never pay out to your family or estate.
Benefits of setting up your own personal insurance:
- You own and control the insurance.
- The policy is underwritten at the start. This means the insurance company has accepted you and the insurance is actually in place.
- Pay less, while getting real value.
- You choose if you want to use Term Insurance or Permanent Insurance. You decide on the Face Amount of the insurance. You choose the duration and you lock in guaranteed rates.
- Flexibility to continue, reduce, cancel or convert to permanent your insurance as your mortgage is paid off.
- Portable. This means you already have mortgage insurance in place if you want to switch your mortgage to a new lender. You can also strengthen your bargaining position by letting your current bank know that you have personal insurance in place and that you’re ready to switch lenders if they can’t provide a better mortgage rate for you.
- The money goes to your family to decide how to use the insurance money.
Be Careful: Of what you are not being told at the bank, because you won’t find out until it’s too late!
Tip for Couples: Instead of getting one ‘Joint First to Die’ policy by your bank, consider getting two Individual Personal policies. That way you each have an insurance policy, and if there is one death claim the other still has life insurance in place for down the road.