Term Life
vs. Bank Life Insurance
Author:
Ivon T. Hughes
The flexibility
and affordability of term life insurance provides numerous advantages
over lender-backed mortgage life insurance plans:
Control:
with most policies offered by mortgage lenders, the lender is the owner and
beneficiary of the plan. The death benefit goes directly to the lender to
pay off the mortgage. With term life insurance, you are the owner and have full
control over the choice of beneficiary. Upon death, the beneficiary can then
make the choice over the best use of the death benefit.
Guaranteed
Premiums and Death Benefit: with term life insurance, you will know exactly
how much you will pay through the duration of the term, and are guaranteed
a minimum $50,000 death benefit. There are no such premium guarantees with
a lender-backed policy, and the death benefit is tied directly into the mortgage
balance.
Portability
of Term Life: it is common for homeowners to switch mortgage lenders
based on who offers the best rates. With a lender-backed plan, the policy
ends when the mortgage does, which means re-applying at an older age, leading
to higher rates each time you switch lenders. With your own term life insurance, the policy
and coverage stays in force no matter how many times you switch lenders.
This allows you to concentrate on getting the best mortgage rate available
without the worry of increasing insurance premiums.
Flexibility
of Term Life: Your own term life insurance means you can lower the amount of coverage, change the owner or beneficiary to generallyhave full control over what happens to your life insurance.
