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Creditor Insurance Mortgages

Creditor insurance for mortgages may not be the best choice for your insurance needs in case of premature death. Here’s why:

 

    • Rates are not guaranteed. Insurers may raise the rates at any time depending on market interest rates, the carriers’ expenses, etc.

 

    • If you move your mortgage to take advantage of more competitive rates elsewhere, you may be left without insurance coverage.

 

    • You can’t take a death benefit in a lump-sum cash payment and invest the money instead of using it to pay off the mortgage.

 

    • They are age banded, which means your rates may increase as the policy matures. Your initial bank quote may only be valid for one year.

 

    • Creditor mortgage insurance is subject to a 30-day cancellation notice that could strand you without mortgage life insurance coverage.

 

    • If you respond affirmatively to any health questions on a creditor application, you’ll be denied coverage. Impaired risks are not covered at a rated premium. Individual term policies offer you more investigation into the present status and background of the illness, and can usually often offer coverage at a slightly higher premium.

 

    • You can’t terminate this kind of mortgage because it isn’t a legal contract unlike an individual term life insurance contract.

 

    • You have no penalty insurance (about three months’ interest) if you pay off your mortgage early through a bank or trust company. Penalty insurance is covered as part of an individual term insurance policy.

 

    • Once the mortgage is retired, you don’t have the option of retaining the insurance coverage.

 

  • If your spouse dies prematurely, you are no longer automatically insured

 


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