Wednesday, March 22, 2017
Mortgage Insurance is Trash
Today’s topic is one that really grinds my gears. Almost everyone has it and it seems like a great thing. Today I am going to talk about Mortgage Insurance. Buying a home is an exciting time. You have gone through the whole process of saving for a down payment, finding the right home and securing a mortgage. Once complete you get asked, “Would you like your mortgage paid off should something happen to you?” The answer to that is a simple one: Of course! Many people survive on 2 incomes and losing one of them would be devastating. So you say yes, I will take the mortgage insurance.
One thing that many people don’t realize is that having mortgage insurance doesn’t necessarily cover you. Mortgage insurance has what is called “post-claim underwriting.” When the decision whether or not to pay up comes after the claim is made it can get dicey. Those few questions you answered when applying for the mortgage insurance come into play. If you answered any of them incorrectly, you can have your claim denied. This is the case even if you don’t commit fraud. Answering a question incorrectly with no ill-intent leaves you uncovered.
Also, as your mortgage balance decreases, so too does your coverage level. Your premium should, therefore, go down as well shouldn’t it? Well, it often doesn’t. Your need for insurance probably will continue even after you pay off your home but with mortgage insurance, once the mortgage is paid off, the insurance is gone. There are no lifetime options, no conversion privileges, no real benefit to you at all.
Securing your own personal coverage is the best solution. Personal coverage does the underwriting up front. That means you know where you stand right away. It is always best to know that you are covered in any situation. In my opinion “post-claim underwriting” should be banned and in some places, it has been. Make sure you know you are covered from the get-go. CBC Marketplace did an expose on Mortgage insurance that might be useful to watch. I have attached the YouTube link to it. Check it out, you may be shocked at what you see.
“Everyday is a journey, and the journey itself is home.” – Matsuo Basho
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