When taking out a mortgage with a lending institution it’s wise (and often required), to cover off that debt with a life insurance policy. But not all coverage options are created equal so it’s definitely worth comparing the available choices.
The two main options available to you are mortgage insurance provided through the lender and individually owned term life insurance provided through an insurance broker.
Let’s look at the highlights of the two.
Who’s in Control and How Much Gets Paid Out on a Claim?
With individually owned term life insurance, you own the coverage and you choose who receives the death benefit. The proceeds could be used to pay off the mortgage or for whatever else the beneficiary decides to use it for.
With mortgage insurance through a lender, the lender owns the policy and the lender is the beneficiary. Your mortgage is paid off with the proceeds and there’s no further benefit for your loved ones.
The coverage amount on an individually owned term life insurance policy stays the same even as your mortgage decreases. The coverage on mortgage insurance from a lender declines as your mortgage is paid off, but the premiums stay the same.
Are the Premiums Guaranteed?
Premiums on an individual life insurance policy are guaranteed for the life of the policy, so you know what the cost will be. With mortgage insurance, the rates are not guaranteed and can increase when you renew your mortgage.
What if You Change Lenders?
The coverage provided by your individual life insurance, remains intact if you switch lenders. With mortgage insurance, you need to reapply for coverage if you move to another lender.
Which One Should You Choose?
Having coverage is the most important thing. Whether it’s insurance provided by your lender or an individual policy you apply for through a life insurance broker, you want to make sure that if you should die prematurely, your loved ones won’t have the burden of a mortgage to pay off.
If you would like more information on life insurance to cover off your mortgage, or to provide future income for your loved ones, please get in touch with us.
