Mortgage insurance is specifically designed to guard a repayment mortgage. In case of injury or critical illness the policy will pay the loan installments or mortgage payments. If the policyholder is to die while the mortgage insurance is in force, the policy would pay out a capital sum that will be sufficient to repay the outstanding mortgage.
Bank Mortgage Insurance vs. Individual Mortgage Insurance
LEVEL COVERAGE VS DECLINING COVERAGE - The bank’s coverage is based on the outstanding balance of the mortgage, which means the amount payable in the event of death declines with that mortgage with every passing month. In Individual mortgage insurance it will always pay the full policy coverage.
FLEXIBILITY & PORTABILITY - The bank’s coverage is tied to your existing mortgage, your existing location and with one particular bank. In the event that you have to refinance or apply for a new mortgage in future, your rates will depend on your age or health condition then. On other side it is fully controlled by you; you will not need to re-apply when you re-finance, move, or change banks.
BENEFICIARY - The Bank will always be the beneficiary, and the death benefit must go to the bank to pay off the balance of the mortgage. With the Individual Mortgage Insurance you will always have the flexibility to name your beneficiary. That could make a major difference if there is a claim against your estate.
POLICY OWNER – Bank will be the policy owner in case of Bank Mortgage Insurance while in case of Individual Mortgage Insurance you will be the owner and can make changes in it.