LFS REPORT

Protect Yourself Not Your Lender

When most people apply for a mortgage they also purchase creditor insurance from their lender. While protecting your mortgage is very important, the creditor insurance offered by most institutions may not be the best solution. What you need to realize is that creditor insurance, or mortgage insurance, is nothing more than life insurance with strict limitations.

One of the key issues when it comes to mortgage life insurance is flexibility and control. Generally speaking, with creditor insurance your lender owns the policy. If you find a better mortgage rate at another lending institution you may have to re-qualify medically for the life insurance. Your mortgage life insurance cannot be transferred to another institution. If you die your lender automatically pays off the mortgage. Your beneficiary has no choice about how to use the funds. Also, if you make additional payments to your mortgage, your mortgage life insurance coverage decreases. So the harder you work to pay off your mortgage the faster your mortgage life insurance decreases.  

The lack of control and ability to customize your coverage to suit your situation is another limitation of creditor insurance. Most mortgage life insurance is non-convertible term insurance. There are no cash values, no premium flexibility, and no ability to move to a permanent life insurance policy if your needs change. Since it covers the exact amount of your mortgage you have no coverage when the mortgage is paid off. Mortgage life insurance may leave you fewer options if your health changes or you become uninsurable. Your options for renewing or re-mortgaging with another lending institution may be restricted in order to retain your mortgage life insurance. Finally because the cost per thousand of coverage generally increases every year, costs may increase while coverage decreases.

Luckily there are other options. With personal life insurance you own the policy, not your lender. You can choose a personal life insurance policy that will better meet your family’s needs in the event of your death; including, but not limited to, their ability to continue living in their own home. Your beneficiaries decide how to use the funds; pay off the mortgage, provide a monthly income or take care of a more immediate need. It’s their choice, not your lender’s.  

Personal life insurance allows you to switch your mortgage to another lending institution without jeopardizing your life insurance coverage. And you can feel free to make those extra mortgage payments, because your coverage is not reduced by a decline in your mortgage balance.  

Personal life insurance is all about customization and control:           

You select the plan that meets your financial security goals.      

Many term life insurance products are fully convertible to permanent policies. Because of this option, if your health changes and you find it difficult to get life insurance, you can keep the full death benefit and convert your insurance to one of the permanent insurance policies available at that time, without having to re-qualify medically.            

You can choose the amount of coverage you need and it only reduces if you choose to reduce it. You don’t automatically lose your coverage because you paid off your mortgage.             

Since you are the owner and you name the beneficiaries there are no restrictions on your options for re-mortgaging with a different lending institution if your health changes. Wherever you go, your coverage goes.            

With the vast array of personal insurance products available, you are sure to find one that suits your needs with premiums that fit your budget.   

When protecting your mortgage with insurance be sure to consider all of your options. Contact the professionals at Langlois Financial Services Inc. to help find the right coverage for you.