Mortgage Life Insurance

 WHAT IS MORTGAGE INSURANCE?

Mortgage insurance will pay off the balance of the mortgage to the lending institution in the event of death and disability. Surviving family member does not have any money left for other expenses. Therefore my recommendation is to buy personal term insurance Policy.

What is the difference in the mortgage insuarnce offered by lending institution and personal term insurance?  

(1) LACK OF CONTROL: Policy is owned by lending institution and you have no control.  You have 100% control in your policy.

(2) LENDER IS THE BENEFICIARY: death benefit is paid to the bank to pay off the balance of the mortgage upon death of the insured. Surviving family members do not get any thing.

Personal Mortgage Life isnurance has named beneficiary in the insurance contract. Funds are released to named beneficiary. You can change beneficiary if it is required.

(3) BENEFIT DECREASES: as the mortgage becomes less the insurance coverage decreases but the premium does not. For example you purchase the house for $500,000. $150,000 down payment is paid and $350,000 is the balance left. Let us assume you are paying $37/month for $350,000 mortgage insurance.

Mortgage balance after 10 yrs has gone down to $250,000. Bank will pay the balance of $250,000 to themselves and nothing to surviving owner.

Personal term insurance policy will pay full face amount of $350,000 to surviving spouse or named beneficiary upon death.

Althogh insurance amount is decreasing every year as the mortgae balance decreases but premium remain same.

(4) MAY BE DIFFICULT TO CHANGE LENDERS:  if client wishes to move the mortgage to a different provider he/she won’t be able to take the mortgage insurance along. If health has deteriorated, they are stuck with the current lender.

There is no impact on personal term life insurance policy due to change of mortgage provider or change of property.

(5) ONE DEATH BENEFIT PAID: in the event of a common disaster only the outstanding mortgage balance will be paid-off.

All owners are insured for full amount of balance of mortgage in your personal term policy. Death benefit is paid out in the event of first death and surviving spouse has an option to continue his/her insurance policy.

(6) UNDERWRITTEN AT DEATH:  There is no medical underwriting done at the time of purchase of mortgage insurance. This can cause problems because of review of the medical condition after the demise of the insured. Claim can be denied if something was missed about the health condition.

(7) CONVERSION OPTION:  Insured has an option to convert term insurance in permanent plan without medical evidence while bank’s policy does not provide conversion option.

(8) COVERAGE OPTION: Since persoanl policy is not linked with mortgage, you can buy more insurance to cover other expense. Bank will not allow to provide more or less coverage than the balance of the mortgage.

(9) MORTGAGE PAYMENTS AND INSURANCE PREMIUM UNRELATED: If client stops paying the mortgage, the insurance protection continues in force.

Someone once said that no debt should survive the person that created it. Mortgage insurance is about protecting the clients loved ones. It is a simple concept but the work has to be completed to determine the needs and most appropriate solution for each individual borrower.

Contact Inder (Eva) Madan at (905) 568-1676