When you go to the bank to get a mortgage, you'll inevitably be asked to take
out mortgage insurance. The idea behind mortgage insurance is simply that if
something happens to you or your spouse then your loan will be paid off which is
good news for your family and the bank. Most financial institutions act like
they are doing you a favor by offering you mortgage insurance through their own
group plan, but are they?

The truth is that you could probably get a much better deal and at least an
equal amount of protection by shopping around for your own insurance policy.

Essentially, mortgage insurance is no different than term-life insurance.
With both, your policy only lasts for a specified period of time and pays its
benefits if something happens to you or your spouse. The real difference comes
down to how much control you'll have over your policy and how much you'll pay
for it.

If you choose to use the mortgage insurance offered by the bank, you will not
be able to customize a policy to fit your needs and you'll be lumped together
with other borrowers under a group plan. Because of this, you will only have
limited control over your policy. For example, through a third party provider,
you would be able to choose your own beneficiary, decide how to spend the
proceeds if necessary, and cancel the policy at any time. You would not have
these options with a lending institution.

Additionally, the bank maintains the right to not renew your policy and to
cancel the policy when you sell the house. If you find your own insurance
provider, you can make those decisions yourself.

The other big difference is cost. A third party insurance policy's premiums
will not go up, so you would pay the same premium today that you'd pay ten years
from now. You won't get that same guarantee from a bank which can and probably
will increase your premiums during the life of the policy. In most cases, you'll
probably pay more through a bank anyway. In fact, you could pay as much as 40%
more than you would if you shopped around and found your own insurance provider.
Not to mention that the policy you take out through your bank will gradually
decrease in value while a plan you select from an outside source will be worth
the same amount during the entire policy period.

Of course, many people don't mind paying more for their mortgage insurance
because it's more convenient than dealing with insurance agents. The truth is
that you can easily find a policy that fits your needs and provides affordable
premiums via the Internet. An organization, such as the Hughes Trustco Group,
can even generate quotes for you from multiple insurance providers so you'll
know that you're receiving the best deal possible on the policy you want.

The bottom line is that mortgage insurance is important and should be part of
your home buying or refinancing preparations, but that does not mean you need to
pay more or let the bank make important decisions for you. Instead, you should
find your own personal plan from a third party provider which will let you stay
in control of your policy and will save you money in the long run.