Quote:
Originally Posted by Slava
I am a fully accredited insurance advisor. There are a number of reasons to not buy the lenders coverage:
1. The coverage is decreasing, but based on the amount of the initial mortgage (in other words you pay the same premium, but as your mortgage decreases you don't get any extra benefit)
2. The coverage really protects the lender: If you were to pass on the lender has the mortgage paid out even though you've been paying the premiums....with a stand-alone policy your beneficiary gets the cheque, tax-free, and can do what they want. People don't always want to pay off the mortgage.
3. Once you have a stand-alone policy you can move and not have to re-apply. This is important because you could have health issues in the interim which will increase your rates, or deny coverage for you outright.
4. In the same vein, you have coverage no matter what the term of the mortgage is and you don't need to re-apply. As you age the premiums stay level and are based on your age today. A huge advantage if you renew your mortgage insurance 4-5 times over the course of your amortization.
I hope that this helps! I sent a PM as well. If anyone has any questions or would like information regarding any insurance (not auto or property) I would be happy to help. I can give you information on Critical Illness, Disability and Life insurance. Both from a personal and corporate point of view.
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I'm a certified financial planner and Slava is right on all counts. Here's one more. Mortgage insurance sometimes doesn't pay out. Why? Because it's underwritten at the time of claim, unlike life insurance which is underwritten at the time of application. I have an article from the Ottawa Citizen about two older ladies who hubbies died and their mortgage insurance didn't pay off the mortgage because of this. I read somewhere once that it's possible that up to about 20% of mortgage insurance policies don't pay out at the time of claim. I can't vouch for the accuracy of those percentages.
Do not buy mortgage insurance. However, you need to also understand that mortgage insurance usually includes life and disabiity insurance. Don't necessarily buy life insurance and think you've eliminated the need for disability insurance. Actually, for most people here DI is probably your greatest insurance need. It's expensive, but that's because you're probably more likely to cash in a DI policy than you are life insurance. IOW, you're probably much more likely to suffer a sustained disability than you are to die, and it could last for years.
Mortgage life insurance is a form of group insurance. That means that applicants are all lumped together for calculating premiums. If you're younger and in good health, how do you feel about having some fat, artery-clogged smoker having his premiums subsidized by you? Ah, I thought not.
A problem with the disability part of mortgage insurance is that if you are disabled, it only pays the mortgage payments. What about your other expenses? I assume you'll still need to eat.
You also need to review all of your insurance requirements.
You've had some good advice on this thread. I think you know what to do.