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onetwo_threefour · 06-05-2013, 07:39 AM

This has been discussed in some other threads in past in more detail, but the general recommendation would be to shop around. Typically the mortgage life insurance offered by the lender is not as good as obtaining independent insurance. Some points (not exhaustive):

1. It is non-transferable. If you have a five year mortgage with bank life insurance and get diabetes three years from now, then decide not to renew with your lender because you could get a better rate/product elsewhere, you're not going to be able to keep the insurance. This is only one example but there are many ways this non-transferability might tie you to the bank.

2. The bank is the designated beneficiary, meaning the mortgage is paid off but there is no cash payout to your estate if you die. This might be okay, but if it's he only insurance you have you may be leaving your estate with a debt free house but no cash to pay the bills depending on your financial situation. Further, with interest rates as low as they are right now, you might prefer that you beneficiaries get cash and keep the mortgage so that the insurance proceeds can be invested or divided among beneficiaries without having to remortgage or sell he house.

3. You are paying a fixed premium for a declining payout. Unlike a term life policy that is worth the same face value in 3 years as it is today, mortgage life insurance covers the balance of the mortgage which goes down over time. The faster you pay off the mortgage through privileges, the worse it is. I honestly don't know whether the premiums are lower on accelerated payment schedules if set up from the outset.

4. My understanding, anecdotal as I am a lawyer, not an insurance salesman, is that the cost of bank life insurance is not any better than getting the same coverage independently.

5. The one advantage I recall is that lenders life insurance is relatively easy to get compared to independent life insurance. It requires less time and effort on the part of the customer to arrange.

I'm sure others can add anything I'm not remembering, but those are the main points.

06-05-2013, 07:39 AM	#2
onetwo_threefour Powerplay Quarterback Join Date: Apr 2006 Location: Mahogany, aka halfway to Lethbridge Exp:	This has been discussed in some other threads in past in more detail, but the general recommendation would be to shop around. Typically the mortgage life insurance offered by the lender is not as good as obtaining independent insurance. Some points (not exhaustive): 1. It is non-transferable. If you have a five year mortgage with bank life insurance and get diabetes three years from now, then decide not to renew with your lender because you could get a better rate/product elsewhere, you're not going to be able to keep the insurance. This is only one example but there are many ways this non-transferability might tie you to the bank. 2. The bank is the designated beneficiary, meaning the mortgage is paid off but there is no cash payout to your estate if you die. This might be okay, but if it's he only insurance you have you may be leaving your estate with a debt free house but no cash to pay the bills depending on your financial situation. Further, with interest rates as low as they are right now, you might prefer that you beneficiaries get cash and keep the mortgage so that the insurance proceeds can be invested or divided among beneficiaries without having to remortgage or sell he house. 3. You are paying a fixed premium for a declining payout. Unlike a term life policy that is worth the same face value in 3 years as it is today, mortgage life insurance covers the balance of the mortgage which goes down over time. The faster you pay off the mortgage through privileges, the worse it is. I honestly don't know whether the premiums are lower on accelerated payment schedules if set up from the outset. 4. My understanding, anecdotal as I am a lawyer, not an insurance salesman, is that the cost of bank life insurance is not any better than getting the same coverage independently. 5. The one advantage I recall is that lenders life insurance is relatively easy to get compared to independent life insurance. It requires less time and effort on the part of the customer to arrange. I'm sure others can add anything I'm not remembering, but those are the main points. __________________ onetwo and threefour... Together no more. The end of an era. Let's rebuild...