Part of my job is explaining to clients the advantages and disadvantages of Mortgage Insurance versus Life Insurance coverage, as a means of maintaining their financial commitments in the event of death. Colleague Jeff Gordon of Freedom 55 has graciously provided me his perspective. Enjoy the read.
You’ve worked hard to find just the right home. Shouldn’t you take the time to find just the right mortgage life insurance
protection for you and your family?
Most lending institutions offer mortgage life insurance as part of their mortgage packaging.
But, look carefully before you sign on the dotted line. You could find yourself locked into insurance that does more to protect your lender than it does to protect you.
A personal life insurance policy doesn’t insure your mortgage – it insures you. After all, you’re the one making the mortgage payments. Through a personal life insurance policy, you can plan to meet more of your family’s needs in the event of death, including living in your dream home.
Here’s a closer look at how a personal life insurance policy compares to mortgage life insurance offered by most lending institutions.
It’s about being covered
Generally, most lending institutions offer nonconvertible term insurance; with no cash values, no premium flexibility or ability to move to a permanent life insurance plan if your needs change. With personally owned life insurance, you select the plan that meets your financial security goals. Most personally owned term life insurance products are fully convertible to permanent plans; if your health changes and you find it difficult to get life insurance, you can keep the full death benefit and convert your insurance to any permanent plan without having to re-qualify medically.
Mortgage life insurance offered by most lending institutions usually covers the exact amount of your mortgage. This means your coverage decreases as you pay down your mortgage. When the mortgage is paid off, you are left with no coverage. With personally owned life insurance, your financial security advisor will help you determine the amount of coverage you need and your coverage doesn’t decrease as you pay down your mortgage.
Additional funds could be available at a time when your family may need it the most. You have the flexibility to reduce the face amount when you want. Or, if you need the protection for other purposes, you can keep the insurance.
It’s about being in control
With mortgage life insurance your lender owns the policy and if you find a better mortgage ate at another lending institution, you may have to re-qualify medically for the life insurance protection. Your mortgage life insurance cannot be moved to another institution. Your lender also pays off the mortgage automatically if you die. Your beneficiary has no choice in how to use the funds, at a time when funds may be required more urgently somewhere else.
With personally owned insurance, you own the policy, not your lender. You have the freedom to switch your mortgage to another lending institution without jeopardizing your life insurance coverage. Your beneficiaries can choose how to use the funds – to pay off the mortgage, provide a monthly income or take care of a more immediate need.
It’s their choice, not your lender’s.
A personal life insurance policy doesn’t insure your mortgage – it insures you.
To discuss your insurance, call Jeff Gordon with Freedom 55 Financial at 519-435-6381.
