As a trusted advisor in the real estate, lending and/or general insurance space, you know the whirlwind of emotions your clients face during the closing process. There is excitement, stress, and a mountain of paperwork. In that final sprint to get the deal done, it is all too easy for clients to make a quick decision about mortgage protection—often by simply ticking a box on a lender’s form.
The question is common: “Should I just get my mortgage insurance from the lender?”
It seems convenient. It seems easy. But as their partner in financial success, you are uniquely positioned to help them pause and consider if “easy” is the same as “effective.”
At Qopia Financial, we believe in empowering your clients with choice. While lender-provided creditor insurance has its place, a personally owned term insurance policy is almost always the superior instrument for protecting a family’s financial future.
Here are three simple, clear points of comparison—Portability, Cost, and Beneficiary Control—that you can use to help your clients understand the difference.
1. Portability: The “Golden Handcuffs”
One of the most significant drawbacks of lender-provided mortgage insurance is that it is tied inextricably to the debt, and often, to the specific lender holding that debt.
The Lender’s Policy
When a client buys insurance through their lender, they are purchasing a policy that covers that specific mortgage. If they decide to switch lenders at renewal to get a better rate, or if they sell their home and buy a new one, their insurance usually terminates.
To get covered again, they must re-apply. This exposes them to a critical risk: re-qualifying. If their health has changed—perhaps they developed high blood pressure or had a health scare in the intervening years—they might face higher premiums or be denied coverage altogether. They are effectively “handcuffed” to their original lender if they want to keep their protection.
The Personal Policy
Personal term insurance is fully portable. It is tied to the person, not the property or the loan.
- Freedom to Move: Your client can switch lenders, renegotiate their mortgage, or move to a new home without affecting their insurance policy.
- Locked-In Insurability: Once the policy is in force, changes in health do not affect their coverage or their premiums for the duration of the term.
The Takeaway for Your Client:
“A personal policy follows you, not your mortgage. It gives you the freedom to shop for the best mortgage rates in the future without worrying about losing your family’s protection.”
2. Cost and Coverage: The Declining Value Trap
Many clients assume that because lender insurance is “added on” to their mortgage payment, it must be cheaper. However, when you look at the cost-per-dollar of coverage, personal insurance often wins—especially for healthy clients.
The Lender’s Policy
Lender mortgage insurance typically covers the outstanding balance of the mortgage. As your client pays down their mortgage, the coverage amount decreases. However, the premium usually remains the same.
- Declining Benefit: In year one, the policy might cover $500,000. In year ten, it might cover $350,000.
- Static Cost: Despite the coverage dropping, the monthly cost typically does not go down. In fact, with some lenders, premiums increase as the client enters new age bands.
Essentially, the client pays the same amount (or more) for a shrinking asset.
The Personal Policy
Personal term insurance generally offers level premiums and level coverage.
- Fixed Benefit: If they purchase a $500,000 policy, it pays out $500,000—whether they die in year two or year nineteen.
- Inflation Protection: As the mortgage balance decreases, the “surplus” insurance money grows, creating a nest egg for the family rather than just zeroing out a debt.
The Takeaway for Your Client:
“With lender insurance, you often pay the same price for less coverage every month. With a personal policy, you lock in the price and the payout stays the same, ensuring your family receives the full value you paid for.”
3. Beneficiary Control: Who Gets the Money?
This is perhaps the most emotional and critical difference. It comes down to a simple question: Who do you want to be in control during a crisis?
The Lender’s Policy
With lender insurance, the lender is the beneficiary. If the unexpected happens, the insurance payout goes directly to the lender to pay off the mortgage balance. While this leaves the family with a debt-free home, it leaves them with $0 in cash flow. They have no choice in the matter. The debt is erased, but other pressing needs—income replacement, childcare, education costs, or funeral expenses—are not addressed.
The Personal Policy
With personal insurance, the client names the beneficiary (e.g., a spouse, child, or trust). The payout is a tax-free lump sum given directly to the family.
- Flexibility: The surviving partner can choose to pay off the mortgage if that makes the most sense. Or, they might choose to invest the funds to generate income, pay off higher-interest debt, or cover living expenses while keeping the low-interest mortgage in place.
- Empowerment: It gives the grieving family options and control at a time when they need it most.
The Takeaway for Your Client:
“Lender insurance protects the bank. Personal insurance protects your family. A personal policy gives your loved ones the cash to decide what’s most important—whether that’s paying off the house or replacing your income to maintain their lifestyle.”
Why This Matters for You
As a referral partner, your value lies in looking out for your client’s long-term well-being, not just closing the transaction. By encouraging them to pause and speak with an independent insurance specialist, you are helping them avoid a “convenience” decision that could cost them thousands of dollars or leave their family vulnerable.
At Qopia Financial, our approach is holistic and human-centered. We don’t just sell a policy; we look at how insurance fits into the client’s broader financial plan—including their cash flow, estate goals, and long-term vision.
When to Refer
The best time to bring this up is before the signing appointment at the lender or lawyer’s office. A simple nudge is often all it takes:
“I know the lender will offer you mortgage insurance. Before you sign, I highly recommend comparing it with a personal policy from an independent insurance specialist. It often offers better coverage and more control for your family. I know a team at Qopia Financial who can run a quick comparison for you.”
Let’s Protect Your Clients Together
Your clients trust you to guide them through one of the biggest financial decisions of their lives. Let’s ensure that the protection they choose is as solid as the foundation of their new home.
Contact us if you have questions about how personal insurance compares to specific lender products, or if you have a client who needs a second opinion. Our team at Qopia is here to help.
