Reasons for avoiding banks’ mortgage life insurance
12th October: Are you a recent buyer of a home whose mortgage has been approved by bank and you are considering buying bank’s mortgage life insurance? Take a pause and think twice for you may get into a big problem.
Well, that’s a fact. Many times, people think that buying a bank’s mortgage life insurance is a best bargain for them. However, the fact is that contrary to being a good deal, it’s one of the worst decisions, advises a Toronto based insurance specialist, Rino Racanelli.
Comparing different mortgage life insurance plans– It’s the curiosity about the new house and the desire to protect one’s family in case of death of the individual that prompts him/her to buy mortgage life insurance from the bank.
However, care should be taken to read the fine print in bank mortgage insurance and make a detailed comparison with other mortgage insurance plans, cautions Racanelli. Only then can one know the hidden important differences between bank mortgage insurance and other insurance plans and thus save one’s hard-earned money, adds Racanelli.
Reasons for avoiding bank’s mortgage life insurance—
• Bank gets insured, not you—In case, you commit the mistake of buying a mortgage life insurance from a bank, you don’t get insured, rather, it’s the banks that actually gets insured or covered. The reason is that in case of your death, your beneficiaries do not get any insurance proceeds and the banks get all the amount.
The only benefit for your beneficiaries will be there will be not mortgage debt on your property.
However, still, the bank has a winning edge since it will get back the money lent to you for which monthly premiums were paid by you.
• New underwriting in case of change of lenders—Switching your mortgage insurance lender to the one offering best rates will become a botheration for you since you will have to go through the underwriting process as well as medical questionnaire once again.
• Payout amount shrinks—Another reason for avoiding bank’s mortgage life insurance is that the payout amount decreases as the mortgage gets paid while the amount of monthly premium usually sticks at the same rate per $1000 in accordance with older insured individual’s age.
This means that as each week passes by, the cost of mortgage life insurance becomes higher and higher.