Life Insurance Vs. Mortgage Insurance | ||
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TRADITIONAL TERM LIFE INSURANCE PLAN | LENDING INSTITUTION MORTGAGE INSURANCE PLAN | |
1. Covers mortgage and many other types of loans and financial needs | 1. Coverage is limited to your mortgage only | |
2. You can choose the amount of coverage you need for life, disability and critical illness insurance | 2. You can’t choose the amount of coverage and the coverage amount corresponds to the balance of the loan | |
3. Coverage stays the same for the duration of the term | 3. Declining coverage with each passing year based on mortgage balance | |
4. You can choose anyone as your beneficiary | 4. You cannot choose the beneficiary and the lender is the only beneficiary | |
5. Your beneficiary may spend the money as they want, with no restrictions | 5. The lender is the beneficiary & will repay the loan in the event of your death. | |
6. Underwriting is done at the time of application | 6. Underwriting is done at the time of claim | |
7. Discounts on your premium if you are in good health | 7. No discounts on premiums for healthy people | |
8. You get the best rates based on your own health | 8. Rates are same for everyone and the older you are the higher the premiums | |
9. Policy is owned by you and you are the owner | 9. Policy is owned by bank and the bank is the owner | |
10. It’s an individual policy and you are in complete control | 10. It’s a pooled policy and you have no control | |
11. You remain insured even if you change your lending institution. | 11. Your insurance ends if you change your lending institution | |
12. Your premiums are fully guaranteed | 12. Your premiums are not guaranteed and will change as you age | |
13. You will remain insured even if mortgage is in default | 13. Insurance will become void if mortgage is in default | |
14. Your insurance policy is portable | 14. Insurance is not portable and will lapse if property is sold | |
15. Policy is automatically renewable to age 75 | 15. Policy is not guaranteed at renewal | |
16. Policy is fully convertible to permanent coverage | 16. Not convertible to permanent plan and most plans expires at age 70 | |
17. Lower cost for same coverage | 17. Significantly more expensive | |
18. Coverage is guaranteed for the term of the policy | 18. Coverage is not guaranteed | |
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