Many of you might think, “I already have a policy; why would I ever want to replace it?” In this article, we will cover when you should consider mortgage protection insurance replacement, and when you should not.
The most important thing with mortgage protection insurance is to have it in the first place. If you don’t have mortgage protection insurance and you die, your family will lose their home. If you have mortgage protection insurance, and you’re paying too much for it and you die, your family will keep their home.
Just so you know…we help people replace their expensive mortgage protection policies all the time!
So again, the most important thing about insurance is to have purchased it in the first place…the second most important thing is to get the best pricing on your mortgage protection.
Did you get the best pricing for you mortgage protection policy?
Many people who have purchased mortgage protection insurance did not get the best pricing, and we can save them money…often a lot of money monthly and over the life of their mortgage loan and mortgage protection policy.
Here are reasons people consider replacing a mortgage protection insurance policy:
- They are paying too much for their current policy.
- They were presented only one option when they purchased their policy.
- They weren’t educated on all the options available when they bought their policy.
- They were sold a “one size fits all” mortgage protection policy.
- They lost their current mortgage protection insurance when they bought a new home or refinanced a home.
- The homeowner confused private mortgage insurance (PMI) with mortgage protection insurance.
- You have downsized and purchased a smaller home.
- You have upsized and purchased a larger home.
- You were sold an accidental death policy, instead of a guaranteed death mortgage protection policy.
- They don’t have enough time for somebody to visit their home and help them save money.
- They don’t understand why saving $25-$50 a month is important (it is!).
- They trust no one to sell them the best policy.
- There are just too busy.
They are paying too much for their current policy.
Buying mortgage protection for your spouse, partner, and loved ones is one of the best things you can do for them. Assuring your family can stay in your home after you die is a selfless gift that will benefit your family for generations to come.
Most people are sold mortgage protection after they have sent in a letter that arrived in their mailbox shortly after they purchased or refinance their home. A mortgage protection agent called and visited their home and sold them a mortgage protection policy.
Most mortgage protection policies have liberal underwriting guidelines. This means you were likely sold a mortgage protection policy that covers people with significant medical condition and illnesses.
Here is an example of one insurance companies mortgage protection rates, based on a Standard Health Rating with a $50 monthly premium for a $175,000 mortgage:
- Preferred Plus – Premium is $25.00
- Preferred – Premium is $35.00
- Standard – 0% added to standard $100 Standard rate. Premium is $50.00
- Table 1 – 25% added to standard $100 Standard rate. Premium is $62.50
- Table 2 – 50% added to standard $100 Standard rate. Premium is $75.00
- Table 3 – 75% added to standard $100 Standard rate. Premium is $87.50
- Table 4 – 100% added to standard $100 Standard rate. Premium is $100.00
- Most mortgage protection policies sold go up to Table 4.
- Table 5 – 125% added to standard $100 Standard rate. Premium is $112.50
- Table 6 – 150% added to standard $100 Standard rate. Premium is $125.00
- Some mortgage protection policies sold go up to Table 6.
- Table 7 – 175% added to standard $100 Standard rate. Premium is $137.50
- Table 8 – 200% added to standard $100 Standard rate. Premium is $150.00
- Fewer mortgage protection policies go up to Table 8.
Let’s use Bob as an example. Bob is 48 years old, 5’10”, and 285 pounds and has these health conditions:
- High blood pressure and takes the medications Lisinopril and Atenolol daily.
- Diabetes and has been on metformin for the last 15 years.
- Two bad knees due to osteoarthritis and takes Naproxen to manage pain.
- Thyroid disorder and takes a Levothyroxine.
- Bob had a driving under the influence (DUI) conviction six years ago.
Even with all these medical and lifestyle conditions, Bob would qualify for a Table 4 rated mortgage protection policy. He would just simply have to pay more than a person whose height and weight was more in balance and with fewer medical requirements and health issues.
It’s great that Bob can still get mortgage protection insurance. He is more of a risk to the insurance company, so his rates will be higher. Bob’s premium with this insurance company would be a Table 4 rating at $100.00 a month for $175,000 of mortgage protection coverage.
Let’s consider Paul as an example. Paul is 48 years old, 5’10”, and 175 pounds.
- Paul is healthy, he’s not on any prescription medicines, and he has had no medical illness or condition.
Paul should qualify for a preferred or preferred plus rating. This means Paul’s insurance premium should be $25-$35 a month.
This means Paul, while trying to do the right thing to protect his family, would overpay $65 to $75 a month for his mortgage protection.
They weren’t presented more than one option when they purchased their policy.
As we just mentioned, most homeowners are relying on the expertise of their insurance salesperson to get them the best deal. We are 100% for people getting their homes and families protected. If you overpay for your mortgage protection policy, your home and family are still protected. It would be a tragedy for you to die and not have any mortgage protection insurance coverage in place.
We think it’s good you purchased mortgage protection insurance; we think it’s unfortunate you were sold an overpriced policy. You should be sold the best-priced mortgage protection plan you qualify for, not the easiest plan for a salesperson to sell or funnel you into.
They weren’t educated on all the options available when they bought their policy.
Many mortgage protection insurance agents are only licensed with 1 to 4 companies. If they are a “captive” agent, meaning they work for a single company, they will only sell their company’s individual products. It may not be the best pricing, it may not be the best deal, but that’s what you will be sold.
We work with over 40 insurance companies, so we can do the shopping for you and get you the best mortgage protection insurance pricing.
We will work with you to get you the best protection you qualify for in the quickest amount of time possible, and usually with no medical exam.
They were sold a “one size fits all” mortgage protection policy.
“One size fits all” mortgage protection policies are ones that allow multiple health impairments and overweight allowances to get approved within a policy. If you have multiple health impairments, and you are overweight. and were sold a Table 4 mortgage protection policy, you may have the best policy and pricing available…or not!
Insurance companies view health problems and weight problems differently. Some are more forgiving, and some are more restricting with their underwriting procedures. Some will look back two years on health conditions, some will look back seven years on health conditions, and some will consider if you’ve ever had any health issues.
Here are a few example for a 40 and 60 year old male just to show you how rates differ based off two different insurance company health ratings.
|Insurance Company||Non-Medical||Table Rating||Client Age||Term||Face Amount||Monthly||Yearly|
|Company A||Yes||Table 4||40||20 Years||$250,000||$84.32||$997.00|
|Company B||Yes||Standard Non-Tobacco||40||20 Years||$250,000||$34.79||$404.58|
|Company B||Yes||Preferred||40||20 Years||$250,000||$21.97||$255.44|
|Company B||Yes||Select Preferred||40||20 Years||$250,000||$17.97||$208.30|
|Insurance Company||Non-Medical||Table Rating||Client Age||Term||Face Amount||Monthly||Yearly|
|Company A||Yes||Table 4||60||20 Years||$250,000||$442.46||$5,127.00|
|Company B||Yes||Standard Non-Tobacco||60||20 Years||$250,000||$204.01||$2,372.72|
|Company B||Yes||Preferred||60||20 Years||$250,000||$127.77||$1,485.97|
|Company B||Yes||Select Preferred||60||20 Years||$250,000||$112.80||$1,311.94|
They lost their current mortgage protection insurance when they bought a new home or refinanced a home.
Many homeowners have old mortgages they are refinancing now that interest rates are at historical lows. Attached to some of these old mortgages were declining mortgage protection policies (we even had one of these in the past).
This is a policy with a premium that stayed the same throughout the entire term of the mortgage, but your coverage amount declined based on the balance of your mortgage.
These were popular because they were easy to get; you simply signed up for them during the loan process. They were unpopular because, when you sold your home or refinanced, these policies terminated.
In 2008-2009, when the housing market crashed, these declining mortgage protection policies all but disappeared. The good news is these policies have been replaced with level-term and level-premium non-medical mortgage protection plans.
If you sell your home or refinance with these newer mortgage protection policies, you can take your newer mortgage protection policy with you to your next home or the next mortgage.
The homeowner confused private mortgage insurance (PMI) with mortgage protection insurance.
PMI is insurance you must purchase if you put less than 20% down on your home; it is a cost included in your mortgage payments. It will often cost a homeowner an extra $75-$150 a month for this insurance. This insurance protects the bank or lender if you default on your loan and they must foreclose your home.
Many people these days have little money for a down payment on their home; this adds risk to the bank or lender.
To compensate for this extra risk, they require you to purchase this private mortgage insurance to cover any financial losses incurred when they sell your home in a foreclosure process.
PMI only protects the bank and never protects you and your family. PMI only helps you purchase a home when you have less than 20% of the home’s value to apply towards your home mortgage loan.
You have downsized and purchased a smaller home.
If you had a $250,000 mortgage protection policy and you downsized to a smaller home and now have a $60,000 mortgage balance, it may make sense to replace your mortgage protection policy.
We would caution, however, to verify this will save you money. If you bought your $250,000 mortgage protection policy ten years ago, a smaller face amount mortgage protection policy might not offer significant savings as you are now ten years older.
We recommend you contact us or your insurance company and inquire about your eligibility to reduce your mortgage protection amount and then verify what the corresponding premium savings would be.
If you have questions, just contact us, and we can get you some quotes (often from the same insurance company you have) to see if this would make financial sense.
You have upsized and purchased a larger home.
If you had a $150,000 mortgage loan and you bought a larger home and now have a $350,000 mortgage loan, then it may make sense to replace your mortgage protection policy to cover the additional $200,000 liability.
We would caution, however, to verify that purchasing a new $350,000 policy is your best financial move. Since you have a $150,000 mortgage protection policy, that coverage will be cheaper than if you were now ten years older, looking for that same amount of coverage.
If you’re ten years older than when you took out your original policy, then we might recommend keeping your existing $150,000 mortgage protection policy and then purchasing a $200,000 mortgage protection policy to cover your additional 200,000 liability.
This keeps your lower premium for the $150,000 in force and lowers your premium on the additional $200,000 to get you fully covered up to $350,000.
You were sold an accidental death policy, instead of a guaranteed death mortgage protection policy.
If you are offered mortgage protection coverage during the loan process, it is likely an accidental death policy. This policy will only pay off your mortgage if you died accidentally; it would cover no sickness or illness related death.
Accidental death policies occasionally make sense, but only after you have some guaranteed coverage in place. We often help clients purchase accidental death policies if they are in dangerous occupations or participate in dangerous hobbies (exclusions vary by insurance company).
Small monthly premium amounts, often under $15 a month, are your first tipoff that you may have accidentally purchased an accidental death policy for mortgage protection. If you’re not sure about what kind of policy you purchased, call us and we will be happy to help you understand your current coverage type, amount, and exclusions in the policy.
They don’t have enough time for somebody to visit their home and help them save money.
Most mortgage protection sales are made in your home. A salesman will visit you after you send in a mortgage protection offer letter and sell you mortgage protection. They will ask you questions that get the emotional side of your brain working. These questions, coincidentally, override the analytical side of your brain.
Without an emotional connection to your family and home, you won’t purchase mortgage protection insurance (and we do believe it is important to protect your family). If you don’t love your family and want to protect your home, then perhaps, the marriage counselor is a better solution than an insurance salesperson.
If you love your family and want to protect your home, we encourage you to do so; we just want you to get the best pricing possible.
Many people don’t understand why saving $25-$50 a month is important (it is!).
- Saving $25 a month will save you $300 a year and $6000 over the life the 20-year mortgage protection policy.
- Saving $50 a month will save you $600 year and $12,000 over the life of a 30-year mortgage protection policy.
It typically takes less than an hour of your time to get approved for one of our non-medical mortgage protection policies. That is the equivalent of making $6000-$12,000 an hour; wouldn’t that be fun to make that much at least once in your life! We live for those moments!
Accumulating wealth isn’t how much you make; it’s how much you keep. We will help you keep as much of your hard-earned dollars as possible while getting your home and family protected for generations to come.
They trust no one to sell them the best policy.
Most insurance agents always do the right thing for their clients. Most insurance agents don’t work with over 40 insurance companies. So, if your insurance agent only works with three or four insurance companies, they probably sold you the best price policy available to them.
They also may have sold you a policy that makes them the most money. Some insurance companies discourage insurance agents from selling the lowest price policy by offering lower commission on those insurance products.
Many mortgage protection agents purchase your information in the form of “leads.” This means their cost of doing business is high. This can put pressure on an insurance agent to sell policies that are more expensive, earning them a higher income in commissions.
Everyone needs to feed their family and pay to have a roof over their heads, so we don’t fault people for selling what they sell and why they sell it. We just operate our business differently and run a low overhead Internet-based business so that we can help you find the best policy with no sales pressure.
If you want a face-to-face shopping experience with a mortgage protection salesperson, mail in one of those letters that show up in your mailbox after you buy or refinance your home.
We use computer screen-sharing technology to show you the best pricing (on your phone or computer). We use email, texting, video conferencing, or whatever else it takes to give you the best insurance buying experience and save you the most time.
There are just too busy.
The old way of buying mortgage protection insurance is to have somebody visit your home and sell you mortgage protection insurance. Most spouses or partners only see each other for 3 to 4 hours a day. Why would you want to spend any more time than necessary with an insurance salesperson?
We can help you in the morning, and we can help you during the daytime, or we can help you in the evening.
Our goal is to help you wherever you are, and when it is most convenient for you. This is where the insurance industry is going, so that’s where we’re going. Our customer experience is our most important focus.