Career Employment Strategies

Saturday, December 02, 2006

Mortgage Life Insurance For You Or Lender

When you take mortgage for buying home from bank or lender you are offered mortgage life insurance and along with this you will be asked whether you would like to add their coverage to your monthly mortgage payment. You will say yes as you will find easy to pay in this way. But this insurance will protect your lender or bank rather than you and your family.

The professional financial experts advise that you should go for an insurance plan that insures you, not your mortgage. It may be in your family’s best interest to see if a personal life insurance policy is a better way to go.

With bank-offered mortgage life insurance
The beneficiary is the bank. Most lending institutions offer non-convertible term insurance.

There are no cash values and coverage is exactly equal to the amount of your mortgage.

Your beneficiary has no choice about how to use the proceeds, at a time when this money may be required the most.
Your coverage decreases as the mortgage is paid down, but your premiums remain the same for the entire period — meaning the cost of your insurance relatively speaking is actually increasing as your coverage decreases.
And you’ll have absolutely no coverage when the mortgage is paid off.

Your lender owns the policy and may raise the premiums or cancel it at any time. And if you find a better mortgage rate at another lending institution, your existing mortgage insurance cannot usually be moved. You would have to re-qualify medically for protection with your new lender (or even if you stay with the same lender but arrange a new mortgage on another home), and if you’re older or in poorer health, you’ll likely face much higher premiums if you’re able to obtain the coverage at all.

With a personally owned life insurance policy
You own the policy and designate the beneficiary.

Your beneficiaries can choose how to use the proceeds — to pay off the mortgage, provide a monthly income or take care of immediate needs. It’s their choice, not your lenders.

Your declining mortgage balance doesn’t reduce your coverage and coverage continues after the mortgage is paid as long as you continue to pay the premiums.
Your beneficiaries will always receive the total value of the insurance plan you purchased.
Premiums are guaranteed for the life of the plan and only you can cancel or make changes to your plan.
You choose the type of insurance that best suits your needs with premiums that suit your budget. And you’re free to reduce the amount of coverage when you want.
Your plan can usually go with you from one home to the next, one mortgage to the next.
There’s no doubt mortgage insurance is absolutely necessary to protect your home and family.


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