Mortgage Protection InsuranceThe best thing you can say about Mortgage protection insurance -- sold by large financial institutions is: although it doe tends to cost more than privately owned personal insurance. It does pay -most of the time!!! Mortgage insurance is a type of term life insurance. It is meant to protect the mortgage holder (the bank) should you die premturely. As the mortgage goes down so does coverage- but the good old payment stays the same! This mean you pay more for this coverage than you would if you owned your own personal policy. To get you to buy this “mortgage protection insurance”, the Bank pitch goes something like this. The Banker
The Bank mortgage person looks up from the paperwork and says:“Would you like life, disability and critical illness insurance on your mortgage?” “Well how much does it cost?” You ask. The Bank employee consults a small chart and gives you a small monthly figure. It seems reasonable and the Bank employee adds “It can be very conveniently added into you monthly mortgage payment, so you will hardly notice it and after all it does protect your family.” Unfortunately not everyone who buys this insurance gets paid if there is a death.
So you take the Bank’s offer and answer a few health related questions on a questionnaire and you are done. You will pay more for that convenience. This type of insurance normally costs more and protects less. With a personal policy, if your mortgage--on day one--is $500,000 and you die your family receives $500,000. With Bank mortgage protection insurance your $500,000 mortgage is paid off. Fast forward 10 years. Your mortgage now stands at $300,000 and if you die your personal policy will pay out $500,000. With Bank coverage your $300,000 mortgage is paid off. In both cases your premiums remain the same. Extend that out another 10 years. Your mortgage is now down to $100,000, and you die. Your personal insurance will pay out $500,000. With Bank coverage will pay off the $100,000 mortgage. The most important issue with the coverage the Bank sells is will it pay at all?Bank mortgage protection insurance is it is underwritten at time of claim.This means the decision to pay out will be decided upon -- after you die, become disabled, or are diagnosed with a critical illness. And the vicious truth is -- this insurance sometimes does not pay at all! The scenario goes something like this. “Mrs Jones you and the children have the Bank’s heartfelt condolences at your loss. As far as the mortgage coverage is concerned, unfortunately your husband inadvertently checked off the wrong box on the health questionnaire when the original paperwork was done. I am terribly sorry to say the mortgage is not covered.” A number of people have heard this from Bank officials, over the years, with no legal recourse. To prevent this from happening to you (plus saving you some serious money). Talk to a professional insurance agent, bout owning insurance--life, disability and/or critical illness. A personally owned policy from an insurance agent or broker, is underwritten at time of application. This means the insurance company decides whether or not they will pay out at the time you apply for the policy. If they won’t pay--they won’t give you the insurance!. An insurance agent can show you the difference in cost between the mortgage protection insurance the Bank pushes and quality personally owned insurance. When you got your mortgage--did you shop for it? Did you look around, investigate? Or did you just take the first mortgage you were offered with out question? So shop for your insurance! Get an insurance agent working for you, not the Bank. Your personally owned life insurance will provide a guaranteed death benefit, disability amount, or critical illness amount to or your family tax free should a tragedy befall you. Bank mortgage protection Insurance protects the Bank not you! And should the claim be denied the Bank can always easily foreclose on you or your family and take your home away. Personally owned insurance is your best, least expensive solution. See an Insurance professional. Have them do an analysis of your current situation.
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Terry Johnston CFPJ C Mitchell Financial Services Inc. Phone: 866-721-7781 ext. 232
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