Points to Consider When Life Insuring Your Mortgage

 

 

 

With a Life Insurance Company

 

 With a Bank or Trust Company
·         You purchase an individual policy which is fully underwritten at time of application. ·         You get a certificate relating to a master group policy which is typically underwritten at time of death.
·         You own the policy – you have complete control over it. ·         The bank owns the group contract – you have no control over it.
·         You have guaranteed premiums. ·         The group policy premium schedule can change at any time.
·         You may purchase any amount of coverage. ·         The face amount of your policy can only be for the exact amount of your mortgage.
·         Although you can cancel your policy your individual policy cannot be cancelled by the insurance company (except for fraud or misrepresentation in the first two years). ·         The certificate can be cancelled by the bank’s issuing company at any time.
·         Your individual policy may be continued as long as you wish.  It is fully portable. ·         The coverage will terminate upon mortgage repayment or assumption or sale of house.
·         You can make a beneficiary designation. In the event of death your beneficiary will receive the proceeds.  Your beneficiary will have the choice of repaying the mortgage or not.  Proceeds from a life insurance company are protected from all creditors (including banks). ·         The group policy does not allow you to make beneficiary designations.  In the event of death the bank is repaid automatically – not your family (in other words the bank protects their investment and makes you pay the premium).
·         You and your spouse may own an individual policy.  Should you both die the proceeds are paid on both policies. If one dies then the coverage on the survivor will continue. ·         The group policy covering the husband and wife pays on the 1st death – not both.  The coverage on the survivor cannot be continued.
·         There is a 30 day period of grace during which the coverage is continued if a premium payment is missed. ·         There is no grace period. Coverage ends immediately if a payment is missed.  This can include mortgage “premium holidays.”
·         Insurance payment is separate from mortgage payment. ·         Insurance payment is combined with mortgage payment.  If a mortgage payment is missed the family is also without protection.
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