Buying Mortgage Insurance? Lender vs Independent

Buying Mortgage Insurance? Lender vs Independent
I met with an insurance broker last night and she raised some interesting points while we were talking about mortgage (life) insurance. Most people buy insurance on their life when they get a mortgage to protect their loved ones in case of death of mortgagor. Usually the life insurance – also called mortgage insurance – is offered by the mortgage lender when the borrowers sign the mortgage papers. Before you accept that insurance policy from your mortgage lender talk to an independent insurance advisor.
Here is a little comparison based on my conversation with the insurance advisor:

Lender’s Insurance Insurance Company
  • Lending institution owns the policy
  • You own the policy
  • Lender is the beneficiary
  • You are the beneficiary
  • The benefit is used by the lender to pay the balance of mortgage
  • You decide who receives the benefit
  • If you move you mortgage to another institution, your coverage may change
  • Your coverage remains unchanged even if you switch lenders
  • You may lose coverage when your mortgage is paid or is in default
  • You coverage remains the same even when you are in defult of your mortgage payments
  • Your coverage is based on the mortgage amount and often declines with the mortgage balance
  • Your coverage remains same even when your mortgage balance declines

This comparison if for your information only. Please consult an insurance professional before buying any kind of insurance as I am no insurance expert.

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