When choosing an affordable life insurance policy, consider the type of life insurance policy you need, how to get the best rates and decide where to buy coverage.
It used to be that your only option for buying life insurance was through an insurance broker, but these days you can purchase life insurance coverage through brokers, agents, credit card companies and banking institutions. Here are some things to consider when determining whether or not bank life insurance is the right kind of coverage for you.
Bank Life Insurance
Banking institutions have been selling a form of affordable life insurance for many years, most commonly called, “creditor’s insurance” or “mortgage life insurance.” This type of bank life insurance is designed to cover the outstanding balance of a specific loan or mortgage should you die before the mortgage is paid in full.
Many people purchase these policies mistakenly believing they are purchasing term life insurance coverage or whole coverage; but these polices only cover the one loan you purchase the policy for. Make sure that if your intent is to purchase whole life insurance or term life insurance coverage, you are not actually buying creditor’s insurance or mortgage life insurance in error.
Bank Life Insurance vs. Life Insurance Company Policies
There are some differences between bank life insurance and the kind of life insurance you purchase directly from a life insurance company, agent or broker. Some discover the cost of life insurance purchased through their bank is lower than policies from an insurance company. Compare the actual coverage you receive for the money to determine which option is really the better deal.
Life Insurance Companies
- You buy an individual life insurance policy, you own the policy and you have complete control over your policy.
- Your insurance premium is guaranteed in advance and cannot be changed.
- You can purchase any amount of life insurance coverage and can add more coverage to an existing policy if your needs change.
- You may cancel your life insurance policy if you choose to, but the life insurance company cannot cancel your policy.
- If you refinance your mortgage or any other loan, you don’t have to make any changes to your life insurance policy.
- You decide who your beneficiary will be and your beneficiary receives the proceeds of your life insurance policy when you die. The life insurance proceeds are protected from creditors.
- If you should become terminally ill and unable to work, or otherwise are unable to pay for your mortgage or loan payments, your policy will pay death benefits upon your passing as long as you continue to pay for your life insurance policy.
Bank Life Insurance
- Life insurance is under a group policy, is owned by the bank and you do not have any control over it.
- The premiums you pay for your policy may change, if the company decides to raise the insurance premiums for the group.
- The life insurance coverage is for the outstanding amount of debt you owe (on the mortgage or loan being insured) and as you pay down your debt, your life insurance decreases.
- The life insurance coverage can be canceled by the issuing company of the policy or the bank at any time.
- If you refinance the mortgage or loan you have insured, your life insurance coverage ends
- The bank is the beneficiary of your life insurance policy and any death benefits are used to pay off the mortgage or the loan being insured.
- If you become terminally ill, unable to work or otherwise unable to pay your mortgage or loan payments, your insurance coverage will be cancelled (at a time when it is most needed).