Why having your own mortgage protection insurance is better than the Banks private mortgage insurance (PMI) or FHA mortgage insurance premium (MIP)
Buying a home is a major investment, and it is important to protect that investment from unexpected events that can affect your ability to make mortgage payments. One way to do this is by purchasing mortgage protection insurance, which is designed to provide financial support in the event of disability, job loss or death. While most banks offer insurance on homes, opting for personal mortgage protection insurance may be a better choice for several reasons.
These types of insurance aren’t about protecting you – they’re about protecting the bank. They pay your lender in the event that you get foreclosed on. You can still choose to have mortgage protection insurance that helps protect you and your family even if you have MIP or PMI through your home loan.
You are in Control
When you purchase personal mortgage protection insurance, you are in control of the policy. You choose the coverage that best suits your needs and budget. With bank insurance, the coverage and terms are often dictated by the lender, and they may not provide sufficient protection in case of a crisis.
Flexibility
Personal mortgage protection insurance is often more flexible than the insurance offered by banks. For example, personal insurance policies can cover a range of events that can affect your ability to make payments such as job loss, disability or illness, while banks may only offer protection for death. With personal insurance, you have the ability to tailor your policy to fit your specific needs.
Portability
If you switch lenders, personal mortgage protection insurance can easily be transferred to the new lender. Bank insurance, on the other hand, is often tied to the original lender, meaning you may have to purchase a new policy if you switch lenders. This can be inconvenient and may also result in a loss of coverage.
Cost
While bank insurance may seem like an attractive option, it can often be more expensive than personal mortgage protection insurance. Bank insurance premiums are usually added to your mortgage payments, which means that you will pay interest on the premiums over the life of the mortgage. This can significantly increase the total cost of the insurance. Personal mortgage protection insurance is typically a one-time payment, which can result in significant savings over the life of the policy.
More Comprehensive Coverage
Personal mortgage protection insurance is often more comprehensive than bank insurance. For example, some personal insurance policies can include coverage for job loss, disability, critical illness, and accidental death. Bank insurance, on the other hand, often only covers death, leaving you exposed to other potential risks.
How similar is mortgage protection insurance to term life insurance?
For the most part, it works the same way as term life insurance. Once you purchase a policy, you continue paying regular premiums until the end of the policy term. In the event of your death during the term, the policy pays off your mortgage as a tax-free benefit. Under other circumstances, like disability or job loss, the policy may simply make mortgage payments for you for a period of time. Either way, your family won’t have to worry about managing those payments.
Like other life insurance policies, some mortgage protection insurance policies build a cash value as you pay into them. If your policy builds a cash value, and that value reaches the amount you owe on your home, you can cash the policy out in order to pay off the mortgage early. It may be a smart move. Since the policy only pays what’s left on your mortgage, you don’t want that cash value to get higher than the amount you have left to pay.
In conclusion, personal mortgage protection insurance can provide better protection for your home and your finances than the insurance offered by banks. It is more flexible, portable, and cost-effective, and it provides more comprehensive coverage. When considering mortgage protection insurance, it is important to carefully evaluate your options and choose the policy that best meets your needs. To fully understand the terms and conditions of a mortgage protection policy, it’s always a good idea to speak with a trusted insurance agent. Drivers Legacy, as a leading provider of insurance, can help you explore your options and find the right policy to meet your needs.
