Before you say yes to mortgage insurance, consider a product designed to protect you and your loved ones - not your lender.
Purchasing a home and negotiating a mortgage represent important events in one's life. A lot of effort goes into the success of this project, not to mention the fact that for many homebuyers, this is their first big financial commitment.
Quite often, people get so caught up in the loan negotiations that the decision to take out mortgage insurance with the financial institution is made hastily. Homebuyers sometimes mistakenly think that loan approval and mortgage insurance are a "package deal" or that the loan is dependent upon having such coverage. And when buying a first home, it is often easier to simply purchase the insurance offered by the institution at hand.
Some people also assume that all mortgage insurance plans are the same. But the fact of the matter is that mortgage insurance is different from one plan to the next and can be purchased elsewhere than from the lending institution.
When you're approved for a mortgage, your lender will offer to sell you mortgage insurance but here are some facts you should know:
|Client Questions||Through an Independent Insurance Company||With Most Lenders' Mortgage Insurance|
|I pay the premium, so I would own the policy, right?||YES. You own the policy and you name the beneficiaries.||NO. You're part of the group policy owned by the lender. Your lender is the beneficiary.|
|Is the coverage flexible?||YES. You can increase or decrease your coverage, renew your coverage and convert to permanent protection. If you renegotiate or pay off your mortgage or sell your home, you can continue your coverage.||NO. Your lender will insure you only for the amount of your policy mortgage. You can't alter, renew or convert the policy. If you choose to move your mortgage to another lender, you can't transfer the policy. Your coverage ends when the mortgage is paid off or ends.|
|Circumstances change. If it's better for my beneficiaries to use the proceeds from the policy for something other than paying off the mortgage, will they have that option?||YES. Upon death, the benefit goes directly to your beneficiaries. They decide how best to use the money.||NO. Upon death, the benefit goes directly to your lender to pay off the mortgage.|
|Is the coverage guaranteed?||YES. Your premium and benefits are guaranteed for the life of the policy.||NO. Your premium and benefits are not guaranteed. The lender can change or cancel the policy at any time.|
|I look after my health and I don't smoke, will that make a difference in the amount I pay for coverage?||YES. The amount you pay for your coverage is based on your age, health, and smoking status.||NO. Since mortgage insurance is usually provided through a group plan, you pay the same rate as everyone else.|
Corporate & Small Business
As an Independent financial advisor, my team will provide services tailored to each client’s needs and objectives. Proper planning now can help reduce emotional and financial stress when the need for insurance arises. Adequate insurance for life and long-term care is essential, and careful planning is crucial to nearly any financial goal. Having insurance coverage in place is invaluable, allowing you to focus on what matters most and not worrying about finances.
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