If you could buy 1 apple for $2 or 2 apples for $2, which would you choose?
I’m going to go ahead and guess you’d want more bang for your buck, and would choose the 2 apples.
Obviously. It just makes sense.
So why are some people buying the 1 apple banks are trying to sell them when they can get two for the same price, right across the street?
Probably because they have no idea they’re being gouged. (and for a semi-rotten apple, to boot!)
The Rotten Apple Banks Are Selling
When you take out a mortgage with less than 20% down, Federal rules dictate the mortgage must be insured.
That’s all fine and good.
But then this magical moment happens when the banker extends his hand, revealing the shiniest, most succulent looking bright red apple you’ve ever seen in your life, he says, “And you would want to have life insurance as well, of course?”
(Are Banks also in the insurance business now? Ponder that for a moment.)
Here’s what you don’t know about their good-looking offer.
It seems tailored to protect them, not you.
If you were to die and need this coverage, the bank would pay the money not to your estate, but to themselves. Because they’re making sure, no matter what, they. get. paid.
It’s more like their asset than yours.
(You know they take your money and lend it out to other people, right?)
Its value decreases.
As you pay down the mortgage, you lower the value of your insurance payout. This is because it’s not the value of the home that’s insured, only the balance owing, which decreases over time.
It's value can’t be passed on to beneficiaries.
Mostly because it has no value beyond covering the balance owing on the mortgage. Pop quiz: what value would the insurance policy hold when you’ve paid down the mortgage? (Answer: zero. The policy becomes worthless. But they’ll still have all your premium payments.)
Your premiums go up, up, and up.
The older you get, the more they charge you so when you renew your mortgage (you are now 2-3-4 or 5 years older) you end up paying more as you progress into new catagories of insurability. Essentially, as you age they charge you more and shrink the policy’s value.
It’s to make them money, not you.
Those monthly premiums you’re paying? Yeah… they’re much higher than what you could pay pretty much ANYwhere else. Talk about Upsell/Cross-Sell profitability!
Basically, it almost seems as though banks engineer these policies so you perpetually pay more and more with each passing year, for the promise of less and less. It’s the evil kind of genius.
Getting life insurance from your bank is kind of like getting a loan from your local payday loan store.
It may be convenient, but it’s damned expensive!
The Better Apples Right Across the Street
The place to buy insurance is … are you ready for this? … the insurance broker.
These are the guys that will give you more (and better) apples for your buck.
What you get from brokers that banks don’t give:
Premiums are lower. (That’s enough to switch right there!)
Premiums are consistent for the term you choose, not renegotiated without your consent or control every few years.
The value you buy is the value you keep. It doesn’t diminish with time. If the policy is worth $300K, it’s worth $300K regardless of the balance owing on the mortgage.
It’s an asset and has cash value. Loans can be taken against it, it can be cashed in at any time. It’s your investment in you. Not payments thrown away to never return.
The value of the policy can be passed on to beneficiaries. When you die (I almost said if), the insurance policy is paid out to the estate. All of it. What you do with that money is your business. Pay down the mortgage, go on a cruise, buy a million fidget spinners. It’s your money. Well, your estate’s money.
Real estate is the biggest asset most people will ever own – protect it.