When a lot of people think about homeowners insurance, they usually think about insurance to protect against the loss of the home due to fire or storms. These policies, known as hazard policies, cover some real tragedies that may befall your home, but they do not cover one of the most likely: that you will not be able to pay your mortgage for reasons outside of your control, such as disability or death.
Home life or disability insurance is the kind of policy that protects against this occurrence. It is more likely that you will become disabled and not be able to pay for your mortgage than it is that your home will be consumed in a fire.
Very often, you are offered these kinds of policies when you apply for your mortgage. But you can also get in touch with your own or other insurance companies to find out about this type of insurance. There are a number of reasons you should consider your own insurance policy rather than just take the one offered by your bank.
In addition, individual policies such as this can offer a better range of choices to the homeowner. The lender’s policy will be a “boiler plate” policy, with only the principal amount (the amount of your mortgage or mortgage payments) differing. There is usually no way to change it to suit your needs.
You cannot make it for more than the amount of the loan, in case you wanted to allow for other problems your family might encounter. You cannot change the amount of the proforma policy or make any other changes to the policy.
This is one of the major reasons to shop for your own policy: the amount of control you have over it. In this case, you can change the amount of the policy, or have stay remain the same. Most lender policies are decreasing term. In the case of the bank’s policy, the policy is usually paid down if the loan is paid off or the house is sold. If you choose the policy, you can frequently use it for another residence you move to.
A group mortgage life insurance policy has no conversion feature, but individual policies can be converted, and cash values can accrue on individual policies.
The last and perhaps most important reason to avoid the lender’s policy is that that is not his field. If you want to deal with a professional who understands what kind of insurance your family needs in order to be completely protected, you will probably want to work with a licensed insurance agent.
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