LOAN AND MORTGAGE INSURANCE SCAM

Be extremely wary when any financial institution offers you life insurance on any loans or accounts you may have with them.

With mortgages specifically, but probably also with all other kinds of loans including your charge cards, when your lending institution offers you such an insurance policy they commonly list themselves as the beneficiary. If something happens to you they receive the full amount of your insurance policy regardless of how little or how much you owe on the account. Unless there is a specific clause written into the loan contract or unless the policy unambiguously stipulates that any excess insurance payoff must go to your heirs and assigns (e.g., your grieving spouse) or unless a beneficiary other than the lending institution is unambiguously stipulated, they get it all and keep it all!

In addition, when a lending institution chooses an insurance policy to promote, they do so with only a consideration of what their commission will be (You did know that they get a commission for selling you the policy didn't you?) and how uncomplicated the payoff may be in the case of your death. And they never, ever give you the best rates in the market. Why should they? You're getting hung with the high rates, not them, and they have a profit to make!

Instead, consult with an independent insurance broker (better yet, compare the rates from several) about a regular life insurance policy for the same amount with your heirs and assigns as the beneficiaries. You can almost always get better rates, often with the same policy with the same insurance company! And, if something happens to you, your grieving spouse will get all the insurance money to use for whatever purpose he or she deems appropriate.

For example, recently Stan compared rates between a bank's life insurance on a mortgage and that offered by an independent broker. The bank proposed to charge $99 a month, the broker $77, a difference of $22 a month or $264 a year. Over the twenty year life of the mortgage that adds up to a difference of $5280, a lot of greasy cheeseburgers!

This was for the same insured amount, the exact same policy, with the exact same insurance company! And, Marguerite would get the cash, not the bank! Caveat emptor!