Before you say yes to mortgage or creditor insurance….know the scoop and the FACTS!!!
Most Canadians dream of buying and owning a home, and most Canadians will need to finance that purchase through a lending institution, with a mortgage on their home.
Among the many decisions they will have to make, term of mortgage, amortization, etc,…. is whether or not to insure the mortgage should something happen to them. The biggest reason of course is so their loved ones will not have to worry about losing their home.
More often then not when going through the process, the topic of whether to do this will come up…., a few boxes “ticked” and the creditor mortgage is in place.
That may seem convenient, but before you say yes to mortgage insurance, you should know that you have other options. Protecting your mortgage with an individually-owned term insurance plan, like a term policy, offers you and your loved ones better guarantees and greater choice.
Quite simply, placing a term policy on your loan provides better value, more flexibility – and in most cases at a lower cost.
Take a look at the differences between protecting your mortgage using personal term insurance vs. most lenders mortgage insurance offerings.
With most lenders’ insurance you pay the premiums monthly, but you don’t OWN the policy, vs. a personal term policy you are the owner. The difference this makes is when you OWN the policy, YOU name your beneficiaries.
With a creditor policy, you are part a group policy owned by the lender, your LENDER is the beneficiary and the benefit will go directly to your lender. With a personal policy, YOUR beneficiaries get the money and they can decide how to best use it. Circumstances change. If it’s better for your beneficiaries to use the proceeds from the policy for something other than paying off the mortgage, they will have that option.
You also choose the coverage options and the amount of coverage you want, regardless of your mortgage balance. You can increase or decrease your coverage, renew your coverage and convert to permanent protection down the road should you choose. If you renegotiate or pay off your mortgage or sell your home, you can continue your coverage. With the lender protection, 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.
Also, and a very big deal, is that with a personal policy, your premiums and benefits are guaranteed for the life of the policy. Only YOU can cancel or make changes to your policy. With lender insurance your premiums and benefits are not guaranteed, and they can change or cancel the policy at any time.
With a personal policy, your coverage is based on YOUR age, health and smoking status. So, if you look after your health, and don’t smoke, it will that make a difference in the amount you pay for coverage. Since mortgage insurance is usually provided through a group plan, you pay the same rate for your coverage as everyone else.
Finally, and maybe the biggest reason for consideration, is that lender insurance is underwritten at time of claim, vs. when the policy is applied for as is the case for a personal insurance. This means that if death does occur, the claim could be denied. Something that you don’t want to have happen.
These are all reasons to consider before you tick the yes box to creditor insurance.
Until next time.