Mortgage Life Insurance Companies
Why are mortgage life insurance companies different from stand alone life insurance?
The answer is not so simple, some companies offer both regular life insurance and products that are specifically for mortgage protection. However, mortgage life insurance companies are not your ordinary life insurance company, like many other financial institutions insurance companies have recognized the importance of owning a home and how that relates to the consumer which helps engage development of products geared towards the homeowner.
You often wonder, I am a homeowner what does that do for me? Well, the answer is GREAT THINGS!
You may be wondering if mortgage life insurance companies offer regular life insurance what makes them so different? The difference does not necessarily lie in the quality of the company, AM Best rating or financial security of the company, more so on its trust in the consumer’s credit worthiness and ability to manage risks. All insurance companies use public as well as credit data to determine rate worthiness and insurability, ratings are classified as risk pooling and helps insurers limit the amount of “bad risk” (example insurance company A may not be willing to insure a person with history of heart disease). But what does this data do for me? Unfortunately, it varies by carrier and can be hard to decipher, and or even locate a quote online, but in our experience, there are many mortgage life insurance companies that offer products that provide better rates and benefits for homeowners.
What are the Types of MPI (Mortgage Protection Insurance)?
As a consumer, it is extremely important to discuss with your agent why mortgage life insurance is important as well as what your options are. Here are some tidbits on a few various types of mortgage life insurance.
-Some companies offer varying degrees of insurance that decreases coverages with age of your mortgage, commonly called decreasing term life. This type of mortgage life insurance may be ideal if the cost of insurance also decreases with age and mortgage dollar amount. This is not a very common type of mortgage life insurance but can be seen in products that are geared to only pay off the mortgage and not offer additional benefits to the policy holders. This of this as a bank loan payoff scenario… We do not recommend these type of mortgage life insurance companies very often.
-A great option to remember when browsing through the endless list of mortgage life insurance companies is the level death benefit option, payable directly to beneficiaries. These types of insurance policies are catered to the insured’s long-term needs but are generally based on minimum insurance amounts. (i.e. 250k in coverage) but do not decrease over time.
-Not to be confused with Private Mortgage Insurance, this insurance is intended to pay off your mortgage in case you default on your loan.
-Buyer BEWARE not all mortgage life insurance companies are created equal, some of these companies will only pay directly to the mortgage company, this is NOT a consumer driven policy rather a bank driven policy (the mortgage holder wants their money back, therefore, no benefits are paid directly to beneficiaries)
-Many mortgage life insurance companies offer policies that have beneficiary direct pay options. The advantage to many of these products is the death benefit is paid directly to your family or designated beneficiaries, not directly to the mortgage holder. This does many things for your families financial security. Allowing them to receive funds directly and appropriate them according to their financial needs at the time, as well as carry out any final wishes you may have had.
-Riders that pay! Many mortgage life insurance companies offer added riders that are not available in their standard life insurance line up. Some of these riders are very advantageous to the buyer in respect to cost/benefit analysis. For example one of our top carriers offers living benefits that can be combined as a set to include Disability payments up to $2000 per month, Terminal Illness that advances death benefit for use while still living (up to 100% advance) as well as a return of premium option! (See our segment on life insurance options coming soon!). Having a combination of benefits creates a “living benefits” style of policy, this truly is the ideal way to structure your insurance policy.
-Flexibility is gained because of the riders and benefits that many mortgage life insurance companies are bundling with their products. It is important to be mindful of how much these benefits cost because in some instances it may be less expensive for the insured to purchase separate policies through different carriers, however in our experience bundling with a company such as American Amicable offers some of the industries best benefits availability with competitive pricing.
– Get Your Premiums Refunded! Many mortgage life insurance companies now offer return of premium mortgage life insurance. Please remember that not all companies are created equal, while some companies may refund you all of your “qualified” premiums this qualification may mean they get to keep the rider (which in many cases is just a few dollars a month)… multiply this out by 20 or 30 years and you understand why you need to be considerate of this cost. Some mortgage life insurance companies, however, will not only refund you the regular “qualified premiums” but also the rider cost. When looking at a carrier such as American Amicable you end up having coverage with disability, terminal illness and the option to get a refund at the end of your term you can now see how having this protection Is useful. Ultimately if nothing happens to you and there are no claims made against the policy it was free to have! We do however always recommend our clients to compare plans, in some cases, there might be better financial options than selecting a return of premium policy. You have to remember, you are getting your premiums back BUT you are not getting paid interest for all those held years. After all, that is how the insurance company is paying for your coverage. If you have any questions you should consult your insurance advisor.
What should I avoid when selecting one of the mortgage life insurance companies you offer?
You should definitely consult with our team for the best case scenario of choices, but here are a few DON’T’S
-Don’t pick a policy that does not pay benefits to your heirs
-Don’t pick a policy that contains a disappearing benefit amount (decreasing coverage)
-Don’t pick a policy that does not offer living benefits
-Don’t buy a policy without discussing the benefits in depth with your insurance advisor
But of course, there are do’s also!
-DO consider cost of coverage in comparison to standard life insurance
-DO compare policies in order to customize coverages that work for you
-DO ask your family how much money they would need in the event you should pass
-DO ask your insurance advisor to complete a financial needs analysis
Thank you for checking out Betters Insurance, where Honesty, Integrity and Respect are our three basic beliefs!