- Mortgage insurance policies from the bank only take care of the needs of the bank.
- A term insurance policy can ensure all costs are taken care of in the event you can’t.
- Term Life Insurance policies offer better value for your monthly payments.
myLIFE CANADA ~ Mr. Dempsey
Whether you're buying a home for the first time, or refinancing an existing mortgage, someone has probably suggested you purchase mortgage life insurance. But don't rush into buying a policy until you've looked at all the possibilities. You could end up saving money and getting added life insurance coverage at the same time by purchasing a term life insurance policy instead.
What is mortgage life insurance?
Mortgage life insurance, also known as mortgage insurance or creditor insurance, is offered by most banks and lending institutions. It is a life insurance policy that pays the balance of your mortgage to the lending institution if a person listed on the mortgage passes away.
How does term life insurance cover your mortgage?
When you purchase a term life insurance policy, you take into account all the money your family will need in case you are not around to help out. This includes your mortgage payments.
Extra coverage with term life insurance
A term life insurance policy gives you added coverage and flexibility over a mortgage life insurance policy. The beneficiary of a mortgage insurance policy is the bank, whereas your family receives any payout from your term life policy directly. This gives your family the flexibility of using the money to pay off debts, or, if they can still carry the mortgage payments, they can use it for investing and securing a future income.
Mortgage insurance policies only cover you for the amount of your mortgage you owe to the bank. As you pay down your mortgage, your coverage amount decreases with it. This is called a reducing balance. With a term life insurance policy, you have a constant level of coverage for the whole term and are getting better value for your monthly payments.
Shop, compare and save
When purchasing your new home, take the time to shop around for life insurance. Compare the cost of a term life insurance policy to a mortgage insurance policy. Chances are you'll find a term life insurance policy will have lower yearly premiums and offer more coverage and flexibility than a mortgage insurance policy.