Our homes are the most significant purchases we make in our lifetime and a place to make countless memories. They are, without a doubt, one of the material things we wish to protect the most. Protecting your home for your loved ones can be done in two different ways, but there are financial implications to navigate. Let’s explore the differences between mortgage insurance and life insurance.
Nobody likes to think of losing their home, and nobody wants to shift that burden onto a loved one if they’ve passed. Locking in the right insurance can bring a sense of relief to the whole family.
What is mortgage insurance?
Mortgage insurance is sold by banks and other financial institutions when you purchase your home. The insurance premiums are listed as part of your homebuying costs. The full name for this is Mortgage Protection Insurance.
The pros and cons
- Getting your insurance through the bank is a no-hassle way to sign up for a policy.
- These policies only cover your outstanding mortgage. As your mortgage liability decreases through payments, your potential payout decreases too. It will provide coverage for your mortgage amount but won’t cover anything else.
- Your policy will be underwritten after the transaction is complete. In layman’s terms, your policy may not be valid, despite you paying for it, and this won’t come to light until your loved ones need the sum.
- If your loved ones receive a payout, your mortgage will be paid in full, but the bank will pocket the difference between your premiums and the amount paid.
- Mortgage insurance is much more expensive than life insurance as it won’t factor in your health.
- Your policy can’t be converted or moved once you’re locked in, leaving you held to ransom.
- Your policy is only of use while you remain in your current home.
What is life insurance?
You can also achieve mortgage protection through life insurance sold by registered insurance agents like us. Life insurance coverage is flexible and can cover anything you need or want it to. Covering a mortgage is a common reason for applications but not its only use.
The pros and cons
- Life insurance policies are usually for a set amount, meaning the payout remains the same, even as you pay down or pay off your mortgage!
- Your life insurance policy can also include anything else you need. Adding on additional coverage is easy and very affordable.
- Life insurance will be underwritten at the time of application. If you successfully qualify, you know that’s the amount your loved ones will get.
- If your loved ones receive a payout, they can pay off the mortgage or sell the home using the money as they need.
- Life insurance is surprisingly affordable, and you can get coverage even with existing conditions.
- Life insurance can be converted from term (most used if the purpose is to pay off the mortgage) to permanent.
Mortgage insurance vs life insurance
So why do people choose mortgage insurance over life insurance? Most of the time, they haven’t researched it before buying a home. Mortgage brokers pounce when the time is right, leaving many new homeowners locked into overpriced policies that won’t serve their interests.
An article in Global News Canada featured an expert who spoke on the issue: “Generally, the way it’s offered to [homebuyers] is when they’re sitting there, signing a whole bunch of [mortgage] paperwork and they’re bored and they’re staring at the wall,”
When the bank proposes adding mortgage protection insurance, “for most people, it’s a five-second decision.”
Be informed; get in touch
Buying a home is a life-changing event, and we want your interests to be protected. If you would like to discuss life insurance to cover your mortgage or anything else, please get in touch for more information. Your home is too important to leave it to chance. We won’t let that happen.
Blue Country Insurance – all your protection under one roof… because your health and life matters.
