So you have purchased a new home and are going through the mountain of paperwork your bank has presented you, often overlooked is the simple line item of mortgage insurance. Everyone knows that when you borrow money from a bank, chances are they are going to want some sort of insurance coverage to protect them in case you are unable to repay the debt. This is where bank employees are trained to upsell “Mortgage Protection Insurance.” Here are a few reasons why you shouldn’t buy mortgage protection insurance from your bank.
The bank’s number one goal is profit, as is any business. It is important to remember that when you are speaking with a bank representative; your savings, retirement goals and large purchases are only valuable to the bank as a source of income through fees and interest rates. Commission rates are particularly high on insurance products, motivating bank employees to push them to all of their customers.
So what is wrong with mortgage protection insurance? Aside from the fact the bank makes it a quick decision to make and seamlessly adds the premiums to your monthly payments? Here is why you shouldn't buy mortgage protection insurance from your bank:
This type of policy has a shrinking benefit, if something where to happen to you, you are only entitled to the remaining balance of your mortgage in the payout. However, your insurance premiums will remain the same, regardless of how much equity you have built up.
Your bank is the sole beneficiary
In the event of your death, or inability to work, mortgage protection insurance will cover the balance of your monthly payments, to the bank. Perhaps the beneficiaries could have easily eliminated the mortgage by selling the house, making every insurance premium payment essentially useless.
Claims can be denied
Mortgage protection insurance is easy to sign up for, easy to pay for on a monthly basis, but not so easy when it comes to filing a claim. Insurance companies only take a close look at your case after a claim is filed, meaning they are looking for any reason that you may be in violation of the insurance contract. Be sure to read your policy carefully to check for any benefit exclusions that could apply to you!
What is the alternative?
You need insurance coverage regardless, so why not purchase a term life insurance policy? Your payout will remain the same throughout the term of the policy, so as you pay down your mortgage your surviving family members will benefit from the balance remaining after your mortgage is covered.
In many cases, Term Life Insurance is more cost-effective than mortgage protection insurance. Many homeowners are simply unaware of this and sign any papers the bank offers them.
If you want to learn more about why you shouldn’t buy mortgage protection insurance from your bank, contact DENT Benefits and learn more about how you can save money and better protect your interests.
The information in this material is derived from various sources. Material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact us for benefit, pension and insurance advice based on your corporate or personal circumstances.