Mortgage Insurance vs. Life Insurance

September 24, 2012

Mortgage Monday

While most mortgage brokers don’t deal directly with insurance, we are required to offer mortgage insurance to our clients when putting together mortgage financing.  Here’s a quick look at the differences between the two options.  If you have any questions about mortgage insurance versus life insurance, ask your mortgage broker and we can usually point you in the right direction (I have several insurance folks in town I work with that would be more than happy to help you get the coverage you need).

 

Mortgage insurance through a mortgage lender Term life insurance and critical illness insurance
Who does the insurance cover? Only the individual(s) listed on the mortgage. You, your partner and your children – you can protect your whole family, even those who are not responsible for paying your mortgage.
What does the insurance cover? Only the balance of your mortgage. Whatever you need it to cover. In addition to your mortgage, cover debts like your line of credit, credit cards, etc.
Who gets the benefit if I die or become seriously ill? The mortgage lender is automatically the beneficiary. You decide who gets the insurance benefit and how it’s used – to pay your mortgage, medical expenses or your child’s education – whatever is best for you and your family.
What happens as my mortgage balance decreases? The coverage amount decreases as the mortgage balance decreases. When the mortgage is paid off, the coverage ends. The amount of coverage you have stays the same for as long as you own your policy – unless you decide to change it.
What if I switch mortgage lenders? You may lose the coverage and might need to reapply. Your coverage stays the same – unless you decide to change it. Since your coverage is not tied to your mortgage, you can carry it with you if you move again.
What if I cancel my insurance? You lose all the money you paid for the coverage. Depending on your insurance, you may get some of the money back that you’ve paid in premiums.
What if I want to change my insurance? You can’t. You may have the flexibility to adjust the type and amount of your insurance, or even convert to a permanent solution.

 

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About Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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One Response to “Mortgage Insurance vs. Life Insurance”

  1. Brian Poncelet, CFP Says:

    Great post!

    You can also get disability insurance on the life insurance policy as a rider.
    This will cover your mortgage payments until 65 if you wish.

    Also if you get the right kind of insurance you can get all your money back
    Plus interest !!

    Cheer,

    Brian

    Reply

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