When it comes to insurance, many people are so overwhelmed by the details that they sometimes wind up purchasing products or services they do not need or want. One product sold by many banks today is known as “creditor’s insurance,” which is designed to pay off the outstanding balance on a loan. However, what many people fail to realize is they are actually purchasing a form of life insurance when they do this, and are often paying far more for it than they normally would by dealing with an insurance agent. While banks may try to convince customers they are required to purchase this insurance or will find themselves in dire financial straits if they fail to do so, there are many issues surrounding these types of insurance that give one reason to pause, see more at My Insurance Broker.
The most common form of creditor’s insurance sold to consumers is mortgage insurance, which would pay off the balance of a mortgage should the homeowner die. Customers often believe they are required to purchase this protection plan when they obtain a mortgage from a bank, which is a misconception. In fact, many people do not even realize they are buying a form of life insurance until they have already signed on the dotted line. Because banks continue to lead customers to believe these protection plans are much cheaper that traditional life insurance policies, few people choose to decline these offers when they are in the process of obtaining their mortgages.
However, for those who do choose to decline these offers and seek life insurance policies on their own, they usually find much better deals and service when working with an insurance company. One of the biggest problems consumers face who have purchased these plans through banks is they have thought little if any about their life insurance needs, and often end up not only paying more for protection but also cheat themselves out of additional coverage and benefits they would be entitled to under more traditional policies.
Most insurance agents recommend that those consumers who are age 45 or older and have borrowed more than $250,000 from their bank should decline any protection plans offered by their bank and instead shop around on their own for life insurance coverage. While banks will argue their protection plans are far cheaper than those policies obtained from insurance companies, the old saying “you get what you pay for” usually applies quite well in these cases.
Consumers who purchase policies from insurance companies can have greater peace of mind during the process, knowing they are dealing with insurance experts who understand the market and take the time to learn more about their customer’s needs before suggesting types of coverage. Because there are different types of life insurance coverage such as term life, whole life and others consumers can better plan for the needs of their families by consulting with insurance agents rather than signing a paper in a bank for which they know little or nothing about.
One major advantage of purchasing life insurance through an agent is having the ability to change one’s coverage as the need arises. This is often not an option with creditor’s protection plans, which may provide only a set amount of coverage and offer few if any additional benefits and services. Working with an agent also allows for a more personal approach to life insurance, since a customer can build relationships with companies that can last for decades.
While mortgage insurance offered through banks may seem like a good deal at the time, customers are generally better off to decline this offer and instead speak with qualified insurance agents who know and understand the market in much more detail. Life insurance is a very important decision for any family, and trying to decide what coverage will be needed should not be done in haste while signing one paper after another at a bank.