Top 5 things- Mortgage Insurance from a Lender versus a Financial Institution.
Mortgage insurance was created for the sole purpose that if something was to happen to you, your mortgage will be paid off.
Many people in the marketplace today are not aware of the fact that there are options when it comes to purchasing insurance to cover
your mortgage. The key to buying insurance to cover your mortgage is understanding the benefits and the downfalls of the coverage being offered. We have outlined some common questions consumers ask when buying insurance. This will allow you to understand the key differences for obtaining insurance from your lender or as standalone coverage from a financial institution.
1. Who gets the benefit if you die or become seriously ill?
Lender:
There are no exceptions. Automatically the mortgage lender is the beneficiary.
Financial Institution:
Whatever is best for you and your family? You decide how it’s used and who gets the benefit. Some could be used towards the mortgage or to pay off outstanding debt elsewhere.
2. What does the insurance cover?
Lender:
Only the balance of your mortgage is what is covered. As your mortgage decreases your coverage decreases along with it.
However your premium remains the same.
Financial Institution:
It covers all spectrums. It is up to YOU. This ranges from mortgage to credit cards, lines of credit and even income replacement. Your premium will be a reflection of the kind of product you decide to go with. Various options are available to suit your affordability.
3. Who does the insurance cover?
Lender:
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Financial Institution:
It can cover you; from your family to whomever you want, even if they aren’t responsible for paying your mortgage.
4. When do they underwrite?
Lender:
When you sign up for mortgage insurance with a lender the question is asked if you would like mortgage insurance which is followed by a few additional questions. At thetime of claim it is understood that the underwriting takes place then. This could become problematic for the claim to be paid out.
Financial Institution:
Underwriting is done at the time of application. Once the underwriting has been completed and the insurance is in place, it becomes a legally binding contract with the understanding that all information provided was truthful.
5. What if I want to change my insurance?
Lender:
No exceptions. You cannot.
Financial Institution:
You get the flexibility and choice depending on the coverage you have chosen. It is all up to YOU.
As a seasoned advisor working with all the major financial institutions, I would be happy to review the coverage you have as well as compare other options that suit your needs.
Source: IDC Worldsource Insurance Network.
