Purchasing a dream home is a huge life milestone we all aspire to. The journey to becoming a homeowner is a long process, and can be daunting too as it requires a huge financial investment. So, this means extensive research needs to be done to find the right home and to secure a suitable mortgage loan to achieve this feat.
Congratulations if you've just bought your dream home, and if you're in the process of acquiring one, you need to take due diligence to find the right home, and then secure the best mortgage loan to help you buy your dream home.
Finding your dream home and securing a mortgage loan are the first two steps you have to take on the journey to becoming a homeowner. The third step, which is the most crucial one, is getting the right mortgage insurance to help you secure your home and to protect your loved ones in the event of your demise, or if you suffer from a disability, or a critical illness.
If you agree that it's very important to prevent situations where all the hard work and family memories you've built in your home disappear into thin air because of major life changing events (e.g., death or a misadventure like a disability), then you need a mortgage insurance. The right mortgage insurance will help you pay off your mortgage loan, secure your home, and protect your loved ones should you pass away or suffer from a disability or an illness that prevents you from earning an income.
Chances are you've secured or will secure your mortgage loan through a credit lender like a bank, and at the end of the long mortgage process, they will up-sell you with mortgage insurance. Since they've provided you with a mortgage loan, and you're within their reach, at this point, usually, it seems logical to accept their offer of mortgage insurance for your peace of mind and to protect your family. After all, what does it take? A few more questions, and the deal is sealed. What’s more? You save yourself the hassle of wasting your precious time on researching for mortgage insurance from other financial institutions.
There you go! You've just signed a lifetime deal, with little or no research, and ended up with a mortgage insurance that will not give you the protection you need in the event of your death, or if you suffer from a disability, or a critical illness.
Here are the seven reasons why obtaining mortgage loan and mortgage insurance from the same credit lender will not benefit you.
Beneficiary
Your lender is the sole beneficiary of a creditor mortgage insurance, not your family. The whole point of a mortgage insurance is to protect your family, not a bank for example. So, this is an ironic situation you wouldn't wish for your family to be in. Since the bank takes all the benefit, this means your loved ones will not get a lump-sum, tax-free death benefit in a situation where you pass away to pay off your mortgage loan and to cover your funeral expenses. If it's in a situation where you suffer a disability or a critical illness, you and those financially dependent on you will not get an income replacement to take care of your living expenses.
Coverage Amount
With a creditor mortgage insurance, you don't get to choose the amount of coverage you need. The amount of life insurance must equal the balance on your mortgage. should you need more coverage to cover your final expenses, your children’s education, or replace your income, you won't be able to stack on more to your mortgage life insurance.
Decreasing Coverage
The value of a creditor mortgage insurance depreciates over time. Even though you continue to pay the same price for your insurance, your mortgage will worth less as time passes. Banks will only pay whatever is left owing on your mortgage loan at the time of your death. This is not a fair deal because you are paying premiums for the higher benefit amount that you started off with at the beginning of your mortgage insurance.
Portability
A creditor mortgage insurance lacks flexibility when it comes to transferring your mortgage insurance to another financial institution should you switch lenders. This means you will lose your existing mortgage insurance and will need to re-apply for a new one. This will lead to a higher premium as you will be older at the time you are getting a new mortgage insurance. Worse still, you may even end up not qualifying for mortgage insurance with another lender. Also, banks purposely tie your mortgage insurance into your mortgage agreement so that when it's time to renew your mortgage, typically, every five years, you will have to renew your mortgage insurance policy too. So, your new premium will be based off your outstanding balance, which is now smaller, but this doesn't mean your premium will be lower.
Rate Guarantee
The premiums and terms of a creditor mortgage insurance are not guaranteed because it's usually a group policy. This means you don't own it. So, you are left at the mercy of your credit lender as they can change your terms or cancel your coverage at any time.
Flat Premiums
Since a creditor mortgage insurance is usually a group policy, it means everyone under the policy that are within the same age bracket pays the same premium. Typically, with insurance policies, the healthier you are, the lower your premium should be. But with a creditor mortgage insurance, whether you are a person with pre-existing health conditions, or a fitness-conscious individual who eats healthy, everyone pays the same premium. This is not rewarding for you, especially if you are in good health. You should be getting a cheaper rate compared to an unhealthy person.
Ineligibility
The worst thing that could ever happen to you with your mortgage insurance is that you are deemed ineligible for insurance years down the line if the unexpected happens to you. This often could be as a result of underwriting. Underwriting is the dreaded insurance jargon which refers to the process insurance providers go through to decide if you are eligible for insurance. Underwriting is assessed based on your age, health, lifestyle, and any pre-existing conditions to determine your insurance cost. It's natural to feel that once you apply for insurance with a bank and you start paying monthly premium, that you have nothing to worry about because you automatically qualify for insurance when the need arises.
Here is the big bombshell you should know. There is a major setback with a creditor mortgage insurance which will shock you and your loved ones to the bone marrow when you need protection. Bank mortgage insurance may use post-claim underwriting. This means that your health condition at the time of the claim determines if you qualify for insurance or not. The bank may decide there is something with your circumstance at the time of claim that violates the insurance contract, hence they won't pay.
This is why a personal insurance policy is more advantageous. Underwriting is done at the beginning of your application to decide if you qualify for insurance before you are issued a policy.
The mission insurance advantage
At Mission insurance, we specialize in personal mortgage insurance plans. We are passionate about securing protection for what matters to you the most. Our partnerships with Canadian leading insurance companies that you trust means we have the best-personalized and affordable mortgage insurance plans within our reach delivered to you in Alberta. Our strong network of insurance advisors is spread across Alberta. So, we can easily assign an insurance advisor nearest to your location to help you get a tailor-made mortgage insurance policy. Our experienced mortgage insurance advisors will help you do the tedious work and find the right policy for you from our pool of mortgage insurance plans nationwide.
Don't waste time any further. For your peace of mind, security of your property, and the protection of your loved ones in the event of your death, or if you suffer a disability, or a critical illness, please click this link below:
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