Mortgage Life Insurance Policies
What Is Mortgage Life Insurance?
If you have a mortgage and are a home owner, you have most likely heard the pitch for mortgage life insurance. It typically comes in an envelope from your lender and might include a letter from your lender suggesting that you buy a policy.
It is important to realize though, that the insurance itself is sold by insurance companies. Even though it is called “mortgage insurance,” it is in reality decreasing term life insurance that will pay off your mortgage if you pass away.
How Are Premium Payments Planned?
Mortgage life insurance is a decreasing term policy. The policy starts with a death benefit that is equivalent to your existing mortgage balance. The death benefit reduces at the same pace as your mortgage balance. The premium payments never vary but may cease before the loan payment. Your lender may agree to include the premium payments to your monthly mortgage expense.
Is Mortgage Life Insurance Identical to Private Mortgage Insurance (PMI)?
No-mortgage life insurance is commonly befuddled with Private Mortgage Insurance (PMI), but they have little to do with one another. You purchase mortgage life insurance willingly to shelter your family from having to pay the mortgage.
Mortgage lenders require you to buy PMI to shield them (the lenders) from the probability that you will default on the mortgage.
Insurance Tip: Request for insurance agents to estimate their best price for a decreasing term policy in the same amount, period, and interest rate before buying from a sales pitch sent by your mortgage company.
What Is Credit Life Insurance And Credit Disability Insurance?
When financing some kinds of big items – automobile, furniture, audio equipment – there is a good possibility you will be presented with credit life and credit disability insurance. Credit life guarantees to pay your balance if you die. Credit disability will pay your payments if you become disabled and not capable of working.
Credit life is a decreasing term policy. The insurance premiums are typically added into the loan contract. This type of insurance is constantly voluntary and it can be rather costly. Your lender cannot require you to purchase credit life or credit disability insurance.
Although they may have some comparable elements, credit life and credit disability insurance are not the same thing as mortgage life insurance.
What Is A Life Insurance Rider?
A “rider” is something that is supplementary to the basic policy. Riders can be used to either add benefits to the policy or limit benefits previously in the policy. Common riders are as follows:
Accidental death: Double indemnity is an additional name for this rider. It means that the benefits paid by your policy will be two times the face sum of the policy if you die in an calamity.
Approximately twenty percent of policyholders perish in accidents.
The price for an accidental death rider is usually reasonably priced.
Some critics bring up the point that how the policyholder dies has nothing to do with how much money your survivors will need.
Waiver of premium: This rider allows you to cease paying premiums whenever you happen to become disabled and unable to continue working.
It is crucial to comprehend how the rider defines “disabled.” For example, the meaning could be very restrictive and require you to be so extremely disabled that you cannot do any sort of work whatsoever.
A disability policy can also defend you from monetary hardship due to a disability. Depending on the kind of policy you acquire, it could supply capital to pay for all of your living expenditures, not solely your life insurance premium.
Mortgage protection: This rider fundamentally attaches a mortgage life policy to your chief policy.
Other insured: You can insert life benefits for your spouse or children. They may have varying coverage amounts and be subject to medical underwriting, however.
Guaranteed insurability: This rider would characteristically be added to a whole life or universal life insurance policy.
It gives you the right to procure a new policy or amplify the maximum on your existing policy without having to pass another medical assessment.
The rider will most likely indicate how much you can add and at what time you can do it.
The guarantee may not persist after you reach your mid to late forties.
Accelerated death benefit: This permits you use some portion of your death benefit when you have an incurable sickness. Some policies will insert this rider without causing your premium to enlarge.
Insurance Tip: If your agent automatically includes riders when calculating your premium, request the agent to value each rider independently. You can then choose whether you think the additional benefit any rider provides is worth the added rate.
When It Comes To Insurance Costs, Your Credit Record Can Be Just As Important As Your Driving Record
As a smart consumer, it should be no surprise to you that your credit report can affect the interest rate you get on a car loan. The better your credit score, the better your rate. But did you know your credit can also influence your auto and home insurance premiums?
It’s called insurance scoring, and it can drive up or drive down your insurance premiums.
Insurance companies believe there is a correlation between credit history and the likelihood of someone filing a claim. So now, almost 90% of auto insurance companies, and an increasing number of home insurers use credit information to determine your premiums…or if they should even insure you at all.
What is your insurance score? You can order your insurance scores any time by clicking here. Your insurance score takes into account factors such as your outstanding debt…length of credit history…payment history…and amount of revolving credit (the credit card balances you carry over month to month).
You might be thinking: “Hey, this sounds a lot like a credit score.” Well, you’re right. The two are very similar. However, while both insurance and credit scores look at the same characteristics of your credit report, insurers place more importance on the factors that show long-term stability. They place emphasis on how regularly you pay rather than how much you owe.
Can you improve your score? Keeping your credit healthy can be a big boost to your insurance score (and your credit score, of course!). Here are a few quick tips for a stellar score:
* Limit the number of credit cards you apply for aim to apply for only the ones you know you’ll need
* Pay your bills on time sounds simple, but it is a huge factor in your score
* Be responsible keep your balances well under your credit limit
You’ll find more ideas on how to improve your credit at the Credit Learning Center.
Stay in the driver’s seat One of the best ways to ensure your credit is helping (and not hurting) you is to check it regularly. By checking your credit report frequently, you can stay on top of your information easily.
By making a real effort to improve your credit, you could lower your premiums quite a bit, especially if your credit wasn’t up to par in the past. And that could mean a little extra money in your pocket every month.
Just keep in mind that your insurance score is only part of your premium equation. Things like your age, driving record (for auto insurance and home property value (for home insurance) might also be factors. Ask your insurance agent for the complete scoop on your premiums.
Insurance Credit Score Explained
Insurance companies can use your credit history when you apply for new auto or home insurance. Here is some valuable information that will help you understand how insurance companies use your credit history.
What is an insurance credit score?
A credit score is a snapshot of your credit at a specific point in time. Insurance companies use information from your credit history and your insurance application to calculate a specific insurance credit score. Your insurance credit score ranges from 0-999, with a higher number conveying a better score.
How is an insurance credit score used?
If your insurance company relies on credit scoring, it might use your credit score to underwrite and rate your policy.
- Underwriting is the process of deciding whether to issue you a new policy or to renew an existing policy.
- Rating is the process that determines how much you pay for insurance. In addition to using credit information, insurance companies will use other, more traditional rating factors to determine the premium you pay for your auto or home insurance policy. Some of these traditional rating factors include:
- Auto Insurance – driving record, type of car you own, where you live.
- Homeowners Insurance – where you live, cost to replace your home, claim history.
How will I know if my credit history has affected my insurance purchase?
The FCRA requires insurance companies to notify consumers if an adverse action is taken because of their credit information. FCRA defines adverse action to include denying or canceling coverage, increasing premiums, or changing the terms, coverage, or amount of coverage in a way that harms the consumer. If an insurer takes an adverse action due to your credit history it also must notify you of the name of the national credit bureau that supplied the information.
Examples of an adverse action include:
-Canceling, denying or not renewing coverage;
-Giving the consumer a limited coverage form;
-Limiting benefits, such as eligibility for dividends;
-Issuing coverage other than for what was applied;
-Not giving the consumer the best rate;
-Not giving the consumer the best discount;
-Adding a premium surcharge.
How to Get Cheap Bad Credit Renters Insurance
If you already have a bad credit rating, don’t make your financial situation even worse by neglecting to buy bad credit renters insurance. Whether you rent a house, apartment, or condo, you need to protect yourself from further financial problems by purchasing insurance for your rental.
Why Buy Renters Insurance?
Imagine that the home you’re renting is destroyed by a fire. The owner of the building is insured and is soon able to begin rebuilding the structure. You, however, had no insurance and thus no coverage for your personal property.
That means you need to pay to replace your television, computer, dishes, clothes, books, jewelry, and everything else you own. In addition, you have to pay to live someplace else while your rental home is being redone.
Insurance would have helped replace your possessions and would have covered your additional living expenses.
Finding Cheap Insurance
Renters insurance is relatively inexpensive, though if you have bad credit you’ll likely pay a little more than usual.
To get cheap insurance quotes, go to an insurance comparison website and fill out the form with your insurance information. You’ll then receive quotes from multiple A-rated insurance companies. You can compare the quotes and choose the company with the cheapest quote.
Improve Your Credit
Shopping around for the best quote will help you get the best price for your insurance, but you can lower the cost even more by improving your credit.
Make sure you pay your bills on time and pay down your credit cards. Check your credit history and make sure it’s accurate. If there are any inaccuracies, take steps to get them removed. Once your credit score is better, you will qualify for less expensive renters insurance.
Money Saving Tips
* Raising your deductible can save you up to 40% on your insurance
* Placing your auto and renters insurance with the same company can save you up 15%
How Does My Credit Rating Influence My Insurance Premium?
Let’s start by defining an “Insurance Premium” Everyone knows that an insurance premium is the amount of money that you pay to your insurance company, in exchange to be insured with a certain amount of coverage. You basically give your money to an insurance company, who in turn, promises to cover your losses in certain situations up the agreed amount of coverage.
Many factors go into calculating your insurance premium. The most well-known of these factors for auto insurance are age, driving record, years licensed, car make and model, miles driven per year, primary use of vehicle (work or personal use), and most important is credit history. Contrary to what many people believe, insurance companies do not consider vehicle color major factor in determining auto insurance premiums.
Why is my credit rating used to determine my insurance premium? When people think of credit ratings, they think of personal credit reports and FICO scores, which is not completely accurate. An individual’s credit rating is relative to how it is being used. This means that you will almost always have a different credit rating when applying for a car loan versus a home loan.
Why is this? Because a credit report requested for a person applying for a car loan places heavy weight on your car payment history or lack of history. If you had a recent repossession, you are going to find it tough to find a company that will help you finance a car again. On the flip side, if you applied for a mortgage with the same credit report that showed a recent repossession of your car, you will probably have much higher FICO scores than you did when applying for a car loan.
Overall, credit history is used for all industries to help determine risk. Disagree with me if you wish, but I believe that a credit report is a direct reflection of a person’s responsibility and credibility. Applying this theory to insurance premiums, if you show low responsibility and credibility, you will receive higher premiums due to the higher risk of getting into accidents or committing insurance fraud.
If credit history is such an exact science, why do some insurance companies advertise that they do not use credit scores? Believe me, these companies that provide such loose coverage come at a much higher premium than companies that do a credit check. The insurance companies with no credit check required, simply assume that you have the worse possible credit upfront and factor this into your insurance premium accordingly. It’s simply a marketing gimic that targets people that have been turned down for insurance coverage in the past, or have been dropped by their insurance carrier for driving or credit history.
The best way to find the lowest insurance premiums is to shop around different insurance companies. Each insurance company specializes in certain risks. If you choose an insurance carrier that primary gives low rates to young females and you are an older male, you will get a higher rate than if you went to an insurance carrier that primarily insures older males.
How to Protect Or Improve Your Credit History
What can consumers do to improve their insurance score?
- Pay bills on time. Delinquent payments and collections can have a major negative impact on an insurance score.
- Keep balances low on unsecured revolving debt, such as credit cards. High outstanding debt can affect an insurance score.
- Apply for and open new credit accounts only as needed. Maintain the necessary minimum number of credit cards, as well as other credit accounts.
- Annually request a copy of your credit report. Review for accuracy and correct all errors in writing. Over time, responsible use of credit can increase a customer’s insurance score.
Know your credit history
There is a good chance your current or prospective insurance company will consider financial stability as part of its underwriting process. Insurance scores are based on information from consumer credit reports that insurers or statistical modelers get from the three major credit agencies: Equifax, Experian (formerly known as TRW) and TransUnion. Therefore, it is a good idea to review your credit history to make sure it is accurate.
The Fair Credit Reporting Act requires an insurance company to tell you if they have taken an “adverse action” against you, in whole or in part, because of your credit report information. If your company tells you that you have been adversely affected, they must also tell you the name of the national credit agency that supplied the information so that you can get a free copy of your credit report and correct any errors.
Take charge of your credit history
If your auto insurance company is using your insurance score to calculate your rates, you can take steps to improve your premiums.
- Get a copy of your credit report and correct any errors. Notify your insurance agent and company of any errors and advise them once the errors are corrected.
- Improve your credit history if you’ve had past credit problems. If your credit score is causing you to pay higher premiums, ask your auto insurer if they will re-evaluate you when your credit improves.