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Know your insurance terms

When you obtain a home loan, you almost always have to buy insurance. The lender wants to be protected in case your house burns down or it is in a flood zone.

While policies that cover you against those types of disasters are easy to understand, two other policies _ private mortgage insurance and "credit life" insurance _ are a bit more complex.

If you don't understand how mortgage insurance and credit life policies work, you may be paying for coverage you don't need or mistakenly feel that you're protected against mishaps even though you really aren't.

"A lot of people confuse mortgage insurance with credit life insurance, but they're two totally different things," said Curt Culver of Mortgage Guaranty Insurance Corp., an insurer based in Milwaukee.

Private mortgage insurance, or PMI, doesn't really protect you. Instead, it protects the lending institution that makes your home loan.

While PMI protects the lender, "credit life" insurance protects you or your family.

Credit life, sometimes called "mortgage life" policies, are offered by many lenders, insurance companies and other big institutions.

"If you die, the credit life policy will pay off your mortgage and make life a lot easier for your heirs," said Gene Grabowski of the American Council of Life Insurance.

If you are thinking of buying a credit life policy, you will want to do lots of "comparison shopping" among insurers to get the best rates.

Also read the fine print on the policy before you sign. Some insurers, for example, will pay off only if you die accidentally; your heirs wouldn't get a nickel if you died of natural causes.

In fact, it might even be cheaper to shun credit life altogether and simply increase the amountof your standard life insurance policy.

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