7 reasons not to be caught dead with Bank Life mortgage insurance

7 reasons not to be caught dead with Bank Life mortgage 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’re excited about your new home and want to protect your family in case something happens to you, so you buy the insurance thinking you got a good deal. Not necessarily. Bank mortgage insurance, more commonly referred to as lenders insurance, is full of fine print that homeowners never read, but if they did and compared it to other insurance plans, they would find that there is a huge difference and are wasted a lot of their hard earned money. Most people are simply too busy to review their coverage and probably never read what they purchased. After reviewing and researching the bank creditor insurance contract, here are the top seven reasons why you should avoid the bank creditor insurance product.

Reason #1- Your insurance goes down every year, but your costs stay the same. The amount of insurance protection available through a mortgage lender is limited to the outstanding balance of the mortgage. Your insurance protection decreases with each mortgage payment made, but your costs 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 the insurance proceeds. Because the bank loans you the money for your home, it automatically becomes the beneficiary of any proceeds under the lender’s insurance group contract. Unlike personal term insurance, your family cannot use the insurance proceeds on death to cover needs other than the mortgage.

Reason #3- Your insurance rates are not fully guaranteed in the contract. Your bank can change your rates at any time. With lenders insurance, your premiums are paid on a group basis, which means your rates can be increased at any time if that group’s experience turns unfavorable. Simply put, if the bank is not making enough money from the product, they will increase your interest rates.

Reason #4-Non-smokers pay smoker rates. Most mortgage insurance policies available through the bank only consider your age to determine your insurance cost. There is no preferred price for better health risks. If you are 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 switch banks for a better rate, you lose your insurance policy. Mortgage insurance contracts do not allow for portability, meaning you cannot take the insurance policy with you if you change mortgage lenders. You will need to reapply and qualify for new coverage at the cost based on your new age. Not only will you be paying more for your insurance coverage because of your advanced 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 the bank is gone forever without return.

Reason #6-Bad Advice-Most bank employees are not licensed insurance advisors. Most, if not all, bank service representatives are not licensed insurance advisors and therefore cannot offer expert advice on your family’s insurance needs.

Reason #7-Your bank can cancel your insurance policy at any time! This is true. Most, if not all, lender insurance policies are one-way contracts. Since the bank owns and holds the contract with the insurance company, they control every aspect of the plan. If at any time and for any reason the bank decides to remove this product from the shelf, then they have 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 may tell you that they don’t think that will ever happen. But the contracts I have read make it quite clear that this option is available to the bank and there is nothing you can do about it.

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