Why do you need mortgage life insurance?
One of the most important assets you’ll own over the course of your life will probably be your family home.
If you or your spouse were to pass away prematurely, one of your primary concerns would be for your family to continue living in their home and maintaining their current lifestyle without being forced to move.
If this is important to you, you will want to continue reading.
Where should you get it from?
Any lending institution that issues a mortgage is required, by law to ask borrowers if they wish to insure their mortgage.
Many times, people will feel that they are obligated to buy the coverage offered from their lender and may not be aware they can buy their own coverage.
Take a look at some of the key differences between purchasing mortgage life insurance from your lender versus owning your own personal life insurance.
The three key points you should consider are: Control, Choice and Flexibility.
The main difference between the two is that the coverage you get from your lending institution is not actually owned by you.
It’s an agreement between the lending institution and an insurance company, which leaves you with almost no control over the policy, if any at all.
If you should move your mortgage to another financial institution or even make changes to your existing mortgage, the insurance coverage isn’t transferable because you don’t own it.
This is an important point because anytime you need to get new mortgage insurance, you must qualify for it, medically.
This means that if your health changes, you may have much less options with your mortgage insurance or may not even be able to purchase it again.
When you decide to purchase your own coverage, your coverage isn’t tied to your mortgage in any way.
So even if your health changes down the road, you can freely make decisions on changing your mortgage without worrying about your insurance coverage.
The next point I talk about revolves around choice.
When you own your own coverage, you can design the contract the way you want it.
I find that most of my clients like to have the coverage they require for today, as well as having options for the future.
When you have this type of flexibility, it allows you to protect more than just your mortgage.
For example, some people who are locked in to lower-interest rate mortgages find that, if a spouse dies, they may not want to use the insurance to pay off the mortgage.
Instead, they invest the money and make more than they’re paying on the mortgage.
With coverage from the lending institution, you would not even have this option because the mortgage insurance is paid out to the institution, not a beneficiary of your choice.
When you own your own coverage, you get to decide who gets the money from the insurance policy.
This also leaves your beneficiary with the ability to decide what’s best for them and your family at that time.
The third and last point I want to talk about is flexibility. The coverage you get from a lending institution mirrors your mortgage. That means that as your mortgage decreases, so does your insurance coverage.
You might be thinking that it makes sense because your insurance is supposed to cover your mortgage.
There are two problems with this.
First, the premiums for your coverage are fixed for the duration of your mortgage as the balance of your mortgage decreases. That means, over time, you are paying for less coverage, but the premium remains the same. Secondly, when you own your own coverage and your mortgage is paid off, you can make decisions that extend beyond your mortgage, including estate planning and leaving a legacy.
As you can see there are many benefits to owning your own life insurance contract because of the control, choice and flexibility that it offers you.