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 Your
Money Matters
September
2009 Issue
Are You Aware of Your Mortgage Insurance
Options?
Upon
signing a mortgage, most mortgage lenders will be quick to offer you
mortgage life insurance. Protecting your survivors against the loss
of the family home is prudent financial planning. However, make sure
you’ve looked at all the options before you sign on the dotted line.
You may be better off going with a policy from a life insurance
company rather than your lender.
When
you take out mortgage insurance with your lender, you are generally
joining a group plan as opposed to an individual plan offered by
life insurers. An individual plan has a number of advantages over a
group plan:
-
You own the policy: under a group plan, the lender is the
owner and beneficiary of the policy, which means upon your death,
the death benefit goes directly to the lender. With an individual
plan, you own the policy and have complete control over the choice
of beneficiary. Upon your death, the beneficiary can then decide
how to best make use of the death benefit.
-
You can shop around: these days, it is quite common for
homeowners to switch lenders, depending on who offers the best
rate. If you get mortgage insurance with your lender, every time
you change lenders, you must reapply with the new lender for
insurance, often resulting in higher premiums. With an individual
plan, the policy stays in force no matter how many times you
switch lenders. This allows you to shop around for the best
mortgage rate without worrying about a potential increase in
insurance premiums.
-
Guaranteed premiums and death benefit: an individual plan
offered through a life insurance policy guarantees the premiums
you pay for the duration of the term. Furthermore, there is a
minimum death benefit. There are no such premium guarantees with a
lender-backed policy, and the death benefit is tied directly into
the mortgage balance so your beneficiaries receive nothing upon
your death.
-
Potentially less expensive: when you belong to a group plan,
the cost of insurance is determined by group averages. So older
members of the group, and those who are in poor health increase
the average, resulting in higher premiums. With an individual
plan, the price is determined only by your age and health, which
can result in significantly lower rates.
Before
you agree to mortgage insurance with your lender, feel free to give
us a call and we can get you a quote.
Theresa Wever and the Money
Concepts Team.
Commissions, trailing commissions, management fees and expenses all
may be associated with mutual fund investments. Please read the
prospectus before investing. Mutual funds are not guaranteed, their
values change frequently and past performance may not be repeated. |
