Monday, July 26, 2010

Who is your mortgage insurance protecting?

Most people couldn’t afford a home without a mortgage loan. To keep that roof over your head, you budget carefully and make your mortgage payments each month. And to ensure your house is always home to your family, you prudently seek the protection of mortgage insurance.

The easy way to get that protection is through your mortgage lender. Mortgage life insurance is typically offered as part of their mortgage packaging and the cost of coverage is simply added to your monthly mortgage payment. But that may not be the best option. Here’s why:

With a lender insurance plan.
  • The lender is the beneficiary of the policy. There are no cash values and coverage expires when the mortgage is paid off.
  • Coverage decreases as the mortgage is paid down but your premiums remain the same for the entire period.
  • Depending on the lender's policies they may be able to adjust premiums, change or cancel the policy at any time. If you find a better mortgage rate at another lending institution, your existing mortgage insurance may not be able to be moved.
  • You pay the same premium as everyone else borrowing from the same institution.
  • No personal consultation is provided with the policy.
With a personal insurance plan.
  • You own the policy and designate the beneficiaries who can choose how to use the funds - to pay off the mortgage, provide a monthly income, or take care of immediate needs.
  • Your coverage isn't reduced by your declining mortgage balance. Coverage continues after the mortgage is paid so your beneficiaries stay protected for the life of the plan.
  • Premiums are guaranteed for the life of the plan and only you can cancel or make changes to your plan.
  • Your plan goes with you from one home to another, one mortgage to the next.
  • Your premium is based on your age, health and smoking status.
  • Your plan is 'personalized' -- designed by an expert consultant to be exactly what you need, with premiums that suit your budget.
Yes, mortgage protection is important. But be sure it protects you and not the lender -- talk to a professional advisor who can help make sure the protection you choose is suitable for you and your overall financial plan.

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