Mortgage Insurance--Whose Really Protected?

Does mortgage insurance really protect you or the lender? It is worth your time to do some investigating.

Below is a comparison of the differences between your own personal term insurance and the mortgage term insurance that is offered by most lenders.

Mortgage Insurance:

• You don't own the policy, you are part of a group policy owned by the lender, with the lender as the beneficiary. Your family will never receive the proceeds, and cannot use the funds for any other option. The payment is made directly to the lender.
• The coverage isn't flexible as you can only be insured for the amount of your mortgage, you can't alter, renew or convert the policy. You can't transfer the policy to another lender, and your coverage ends when the mortgage ends or is paid off.
• Your premiums and benefits are not guaranteed. The lender can change the policy or cancel the policy at any time. Rates on mortgage insurance are adjusted every 5 years. So whether you renew your mortgage or not, you will have your rates adjusted to reflect your current age.
• You have no control over your rates. If you don't smoke and are in good health, you don't qualify for a discount in your rate. Since it is a group policy, you pay what everyone pays, good health or not.
• Underwriting of mortgage insurance is often done at the time a claim is made. In otherwords, if the insurance carrier deems you had a condition that would normally have prevented you from obtaining insurance when you purchased your mortgage insurance, they could deny your claim.

Personal Term Insurance:

• You own the policy and you decide who the beneficiary will be.
• You choose the options, amount and length of coverage you want. You can increase or decrease your coverage, renew it or convert to permanent protection at any time. Your coverage doesn't end when you pay off your mortgage or sell your home.
• Upon death, the benefit goes directly to your beneficiary and they decide how to spend the money, not your lender.
• Your premiums and benefits are guaranteed for the life of your policy. Only you can cancel or make changes to your policy.
• The amount you pay for coverage is based on your age, health, and smoking status at the time you apply for it. Underwriting is done at the time of application, so they can't decide later on to deny coverage unless you willfully lied about your health.

Before you sign up for mortgage insurance, disability or critical illness coverage, talk to an insurance broker.

Need one: contact Joseph Enriquez, of Jems Financial Group, at 604-537-0524 or email at jenrique@telus.net.