The Unknowns in Mortgage Life Insurance

November 4, 2011

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This is a guest post by Camilla Kocwin, a Financial Consultant from Investors Group Financial Services Inc.

 

Mortgage financing is probably one of the largest financial commitments you will make in your life. Safeguarding that commitment from the curves life may put in your path, means having the right kind of risk protection. All too often people assume this critical protection has to come from their lending institution. Before you say yes to lender provided mortgage insurance, consider the options. Protecting your mortgage with a personal insurance plan can offer you and your loved ones better guarantees, greater choice and more flexibility and in most cases at a lower cost. Lender provided mortgage insurance does more to protect them then to you, your home and your family – very scary. Here is a closer look at how a personal life insurance policy compares with mortgage life insurance offered by most lending institutions.

PERSONAL PLAN LENDER PROVIDED PLAN
  • Fully owned and controlled by you
  • Fully owned and controlled by the lending institution
  • Only you can cancel it
  • Can be cancelled by the lender without your approval
  • Your premium is based on your age, health and smoking status at time of application.
  • Premium is based on age band and minimal health information
  • Underwriting done at application (approved or denied).
  • Underwriting done at claim (this may come with the surprise of being denied your benefit)
  • Premiums are guaranteed for the life of the plan
  • Premiums can be adjusted by the lender at any time
  • Customizing is possible with the insurance amount, premiums and optional benefits
  • No flexibility or additional options to customize plan
  • Coverage can be level or decreasing and premiums are flexible.
  • Coverage decreases with decreasing mortgage balance although premium generally remains level
  • Lock in insurability
  • Risk of loss in insurability
  • You decide and select the beneficiary with freedom to change
  • The lender is always the beneficiary
  • Pays benefit to your beneficiary
  • Pays benefit to the lender
  • Your designated beneficiary controls the use of the death benefit
  • The lender controls the use of the death benefit (mortgage)
  • Full coverage. Value of coverage stays the same
  • Pays only the amount owing on the mortgage at time of claim. Value of coverage decreases
  • Policy moves with you
  • Policy cannot be moved
  • Coverage continues after mortgage is paid (until expiry)
  • Coverage expires when mortgage is paid off
  • Can be integrated with all your other financial goals and updated to reflect evolving/changing circumstances
  • Stand-alone plan designed to remain outside of other financial needs and solutions
  • Plan designed by personal consultant offering expertise and personalized service
  • No personal consultation provided with policy

 

Before you say yes to lender provided mortgage insurance, consider something designed to protect you and your loved ones (not your lender).

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About Guest Authors

BarrieRealEstateTalk.ca occasionally features guest posts from a variety of real estate professionals around Simcoe County. This is one of those posts (check out the top of the article to find out who contributed this article!).

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