Quote:
Originally Posted by Burninator
/\ Okay. Why not? Keep in mind I know nothing about life insurance or mortgage insurance.
|
Read macker's link.
But here's why:
- Life insurance is underwritten when the policy starts. Mortgage insurance is underwritten when it is claimed. Underwriting is assessing the policyholder's level of risk. So, if your life insurance is approved, then chances are very good that if you do die, the beneficiaries will get their money (since whatever you're paying fairly reflects the risk that you are). For mortgage insurance, they do and say anything to prevent payouts, since they want to prove that what you paid didn't accurately reflect your riskiness.
- The mortgage insurance premium never goes down, even though your mortgage is (presumably) declining in balance. Hence, you could owe $10K on your mortgage but your premium is still the same. Contrast this to life insurance, which has a defined payout for the life of the term.