Mortgage Insurance and Life Insurance

By on February 25, 2013

Mortgage Insurance and Life Insurance

 

If you have a mortgage on your home, you probably have mortgage insurance. If you become seriously ill or die before paying off the mortgage, the coverage should kick in and pay it off for you.

The reality is that you can do far better for your family by getting your own life insurance. As you will see in the chart below, your own life insurance policy usually costs about the same, or less, and offers substantially more protection for you and your family.

 

Mortgage Insurance Personal Life Insurance
Ownership of the contract Bank You
Amount of insurance Declines with your outstanding mortgage balance Remains the same unless you change it
Cost of insurance Remains the same even though your coverage decreasesIf you move houses or change mortgage companies, your new cost of insurance will be based on your new age and will be higher. Remains the same for the length of time you choose.You can move houses, mortgage companies, or change your lifestyle with no change in premiums.
Change in contract Can change without your permission Only you can make changes, as long as you maintain the premium payment
Who is paid on death(Amount of payout) Bank.(Outstanding mortgage balance is paid) Your chosen beneficiary.(The full amount of the policy you chose)
When is underwriting done In most cases, at time of claim. This means the insurance company may determine you are not eligible for a payout even though you have been paying premiums. For instance, a claim may be denied because an investigation of your medical records indicates you once had high blood pressure or high cholesterol. When you apply for individual insurance through, a licensed insurance broker, your medical history will be examined before a policy is issued. The insurance broker will ask detailed questions and may arrange for a nurse to conduct a physical. Once a policy is issued, it is guaranteed.