Why pay to protect the bank?
How the personal life insurance is better than the mortgage insurance offered by the bank?
Insurance is all about being protected. You pay to have your family protected. Then why pay to protect the bank?
The following are a few of the advantages of the personal life insurance over the bank mortgage insurance:
- The personal life insurance is a guaranteed product
- Payable directly to your family
- Usually for a longer term than your mortgage contract
- Independent of your mortgage
- With a level coverage
- With a guaranteed price
- Convertible to a longer term or to a permanent contract
The following table is a more detailed comparison on the Mortgage Insurance and the Personal Life Insurance:
|PERSONAL LIFE INSURANCE||BANK MORTGAGE INSURANCE|
|UNDERWRITING||The approval is done before a contract is issued. When you apply for an individual insurance through a licensed insurance broker your medical history will be examined. You will be asked detailed questions and may need to have a physical. You start paying only after being approved and a policy is issued. There is no approval at the time of claim.||Post-claim underwriting is probable. This means that at the time of claim 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 that you did not disclose.|
|CONTRACT OWNERSHIP||You own the policy, which gives you the flexibility to choose the type of plan and to tailor it to your needs. The contract cannot be changed by the insurer.||The Bank owns the contract and may modify or cancel at their discretion.|
|BENEFICIARIES||The beneficiaries are chosen by you and you can make modifications.||The beneficiary is the Bank. The death benefit cannot be received by your family.|
|COVERAGE AMOUNT||You choose the amount of coverage. The insurance amount is guaranteed level.||The Bank allows you to insure only the outstanding mortgage. The insurance decreases with the balance of your mortgage.|
|PORTABILITY||You can keep the contract after the mortgage expires, or when you change lenders.||The insurance expires with the mortgage contract and when you change lenders.|
|RENEWABILITY||Term policies are renewable to a certain age, usually to age 75 or 80.||With the Bank there is no guaranteed renewability.|
|CONVERTABILITY||You can convert your term contract to a permanent life insurance.||The insurance cannot be changed to a permanent plan.|