Mortgage protection:
bank or insurance company?
Banks and insurance companies offer mortgage protection products with differences that are important to know.
Mortgage protection with an insurance company:
- The beneficiary is your family, not the bank. your family can use the money for any purpose, including paying off the mortgage.
- Insurance companies guarantee your coverage for the duration of your policy. They cannot cancel your policy or increase your premiums if your health changes.
- Insurance companies may offer you lower premiums or more coverage for the same price. You can choose a plan that suits your needs and budget.
with insurance, you have more flexibility and control.
Mortgage protection with banks:
- Banks sell Mortgage Protection Insurance (HPI) which covers the remaining balance of your mortgage in the event of your death. The beneficiary is the bank, not your family.
- Banks may not guarantee your coverage for the life of your loan. They may refuse to renew your insurance if your health changes.
- If you change mortgage lender, you could lose your mortgage insurance.
- Banks may charge you the same premium even if your loan balance decreases over time. You pay more for less coverage.
- Mortgage protection is easier to access with banks because it is often offered with the mortgage contract, although not obligatory.
In summary with the banks for your mortgage insurance policy is the property of your bank and the beneficiary is your bank.
With insurance companies, you own your mortgage protection contract, and you can designate the beneficiary of your choice, the person of your choice.