Mortgage or life insurance

Is Mortgage insurance the same as life insurance?

No so much. Not so much at all. Mortgage or Credit Insurance is just not the same as life Insurance.

There are BIG key differences between mortgage or credit insurance and life insurance.

  1. Post Claim underwriting Underwriting for mortgage insurance is done AFTER a claim not BEFORE a claim by looking at health, age and any pre-existing conditions that might exist, during the application process. What that means is that an individual paying for mortgage insurance for any length of time could be found to be uninsurable only after a claim gets submitted resulting in benefits not being paid.  There’s no guarantee. Yes. It’s possible and risky. (Google scary life insurance stories)
  1. Beneficiary choice. With mortgage insurance, the lender is the automatic beneficiary; not anyone you might choose like a spouse or a family member.  Personal circumstances can and do vary when an individual dies. Paying off the mortgage may or may not be the best option; cash might be more important.
  1. Higher Cost/Declining Benefit: Mortgage insurance offers a declining amount of coverage (in line with your mortgage) for a typically higher cost that one could obtain level life insurance for. There are no discounts for being a non-smoker or being healthy as everyone pays the same price. Prices do also vary for mortgage insurance but there is less transparency in the marketplace so it’s hard to compare pricing.
  1. Portability:Mortgage insurance is tied to your mortgage and is therefore not transferable if you change lenders. Higher rates may apply when you start over with another lender. With life insurance there would be no need to start over. Life insurance offers stable & consistent coverage and often renewable/convertible options maybe offered on a term policy that will allow one to convert to a permanent policy without a medical exam.

These differences are significantly significant. and too significant to be left to chance.

The real key takeaway is that mortgage/credit insurance benefits creditors or lenders first; personal life insurance benefits individuals better.

Take time to investigate and learn.