Individual Mortgage Insurance Plan vs. Lending Institution Plan
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Should I get a Mortgage Insurance Plan through my lending institution?
When you initially obtain your mortgage through your bank or lending institution, you may be offered the opportunity to buy a Mortgage Insurance Plan directly through them. They may even offer you a rate that seems hard to beat, but it's important that you really understand all the pitfalls before you commit to the policy.
- Lack of flexibility: When you buy your Mortgage Insurance Plan through your lender, you can only buy a death benefit that covers your mortgage. You cannot add additional death benefit amounts to cover college tuition or other costs. You also cannot name your own beneficiary, since the purpose of the insurance is only to pay off your mortgage in the event of your death. This means that only your lender can be a beneficiary.
- Underwriting: It's possible that if another company buys your lending institution out, your policy will no longer be any good, since you would have been paying premiums to the other company. If this is the case, then you'll need to get a new policy and undergo new underwriting, which could result in higher premiums or a decline if you're in poor health.