Home Equity Loan and Mortgage Insurance

Posted by EHL on Thursday, June 14, 2007 - 04:51 AM

Are financial lenders really doing you a strong favour by offering you insurance for your loan? Insurance on a home equity loan or mortgage is there in case something happens to the person paying for the loan. In the event of death or serious injury (check the small details on each insurance plan carefully to see what is covered and what is not!), the outstanding loan amount will be covered. This can save your beneficiaries much hassle and expense.

Check to see if the loan is conditional on you signing up only for the lender's insurance plan. You may be able to save lots of money by simply shopping around for your own insurance policy. Mortgage insurance is of course much like any term-life insurance. Both policies have specified expiry dates, and will only pay a benefit if the person covered dies.

By not being able to choose your mortgage or home equity loan insurance plan provider, you may be stuck with inflexible terms and little overall control over the insurance policy. You may not be able to choose the beneficiary for example, or worse still, just how much you will be expected to pay for the insurance. If this is the case, you best look for a different mortgage or home equity loan lender.

A third party loan insurance provider may provide you with the necessary tools that you want and need. These include being able to pick the beneficiary, how the money will be divested, and even be able to cancel the insurance policy at any time. You may not have those luxuries with imposed insurance policies from some lending institutions.

Another thing to consider when choosing an insurance policy for your loan is cost. Be sure the premiums you pay are locked in for the lifetime of the policy. Don't get trapped into an open-ended policy where the premium rates rise each year of the policy. Most consumers save themselves up to 40% by simply shopping around for the best policy. The big banks do not always offer the cheapest rates.

Don't be afraid to deal with an outside mortgage insurance provider. This is their main area of focus and they can save you plenty of time, money and free you from any entangling hassles. Some insurance agents will even present you with a range of choices for your home equity or mortgage loan insurance needs. You may not find this choice at the larger institutions.

Insurance on large loans is always a good idea, especially if there are not other large revenue streams available to cover any unforeseen circumstances. A third-party insurance provider may be your best choice when choosing an insurance plan.