7 Reasons You Shouldn’t Get Caught Dead With Bank Mortgage Life Insurance
You just bought a house and the bank approved your mortgage. Now the bank is trying to sell you their mortgage life insurance. You are excited about your new home and you want to protect your family in case something happens to you, so you buy the insurance thinking that you have a good deal. Not necessarily. Bank mortgage insurance, more commonly known as creditors insurance, is full of fine print that homeowners never read, but if you did and compare it to other insurance plans, you will find that there is a world of difference and that you have wasted a lot of your hard earned money. Most people are simply too busy to check their coverage and have probably never read what they bought. After reviewing and researching the bank’s credit insurance contract, here are the top seven reasons why you should avoid the bank’s credit insurance product.
Reason #1: Your insurance goes down every year but your cost stays the same. Your insurance protection decreases with each mortgage payment made, but your cost will remain the same.
Reason #2-The bank is the beneficiary of your policy, not your loved ones. In other words, you cannot choose your own beneficiary for insurance proceeds. Because the bank is lending you the money for your home, you automatically become the beneficiary of all proceeds under a creditor group insurance contract. Unlike personal property term insurance, your family cannot use the insurance proceeds at death for needs other than the mortgage.
Reason #3: Your insurance rates are not fully guaranteed in the contract. Your bank can change your fees at any time. With creditors insurance, your premiums are paid on a group basis, which means your rates can increase at any time if that group’s experience turns unfavorable. Simply put, if the bank doesn’t make enough money on the product, it will raise its rates.
Reason #4: Non-smokers pay smoker rates. Most mortgage insurance available through the bank only considers your age to determine the cost of insurance. There are no preferential prices for better health risks. If you’re in good health and don’t smoke, be prepared to pay the same insurance rates as someone in poor health who smokes.
Reason #5: If you change banks to get a better rate, you lose your insurance policy. Mortgage insurance contracts do not allow for portability, which means you cannot take the insurance policy with you if you change mortgage lenders. You will need to reapply and qualify for new coverage with the cost based on your new age. Not only will you pay more for your insurance coverage because of your older age, but if your health has changed, you may not even qualify for the coverage you and your family need, leaving your loved ones in a vulnerable position. All that insurance money you paid to the bank is gone forever with no return.
Reason #6: Bad Advice: Most bank employees are not licensed insurance advisers. Most, if not all, bank service representatives are not licensed insurance advisers and therefore cannot offer expert advice on your family’s insurance needs.
Reason #7-Your bank can cancel your insurance policy at any time! That’s how it is. Most, if not all, creditor insurances are one-way contracts. Since the bank owns and has the contract with the insurance company, they control all aspects of the plan. If at any time and for any reason the bank decides to remove this product from the shelf, it has every right to do so. Your insurance protection is gone and the money you spent is lost and can never be recovered. Of course, the bank representative can tell you that he doesn’t think this will ever happen. But the contracts I’ve read are pretty clear that this option is available to the bank and there’s nothing you can do about it.
