Would you buy insurance from a company that names itself as the beneficiary?

There’s a good chance you already did. So why would you pay their premiums?

When you get mortgage insurance at a bank, you’re buying Creditor Protection Insurance, which as it’s name suggests, reimburses the lender in the event of a death. The bank is the beneficiary; not your loved ones. There’s nothing wrong with this, but why would you pay their premiums?

The logic is that it’s because they, in turn, forgive your debt, but is that in your best interest? We understand why it makes sense for them. Your current mortgage is likely at less than 7%. By clearing your mortgage the funds are returned to the bank to be loaned out to the next homeowner at the market rate at the time, which will probably be higher, allowing the bank to make more money. Since it makes sense for them, shouldn’t they pay the premium? It would seem so, but why would they if they can get you to pay it for them?

And does it really make sense for you to get rid of a low interest mortgage when a death occurs? Not likely.

Why would you pay off a low interest rate mortgage if the insurance proceeds can be invested and the income used to make the payments on the mortgage?

If you have your own mortgage insurance, you can name who you like as the beneficiary (maybe not the bank this time?). This way, your loved ones have the money to pay the mortgage, keep the house, keep the low interest rate mortgage, and then keep the principal for their retirement.