Term Life Insurance vs. Mortgage Insurance

Which option is better for you?

Imagine this: you’ve just purchased a new home.  You have happy and blissful visions of your life in this new place and, I’m quite sure, illness and death are not part of them.  But, unfortunately, the reality of death is something we all have to think about.  What happens to our loved ones if we’re no longer here to help with the financial necessities?

Insurance has you covered.

More often than not, people don’t know where to turn when shopping for insurance.   If they had a long relationship with their bank, they may consider mortgage insurance their only/best option. Some people may also feel that the process for applying for term insurance is too cumbersome and possibly scary.

The purpose of this article is to review a couple of insurance options available to you – mortgage insurance (sometimes called creditor insurance) and life (term) insurance.  There may be other solutions which are best suited for you, however.  In order to gain greater insight, I suggest speaking with a qualified life insurance professional.

Mortgage Insurance Term Insurance
Mortgage insurance is payable to the institution that holds your mortgage. Term insurance is payable to your benefactors (spouse, children, grandchildren, etc.).  They have the ability to decide to pay off the mortgage or use the monies for other things (e.g. payout liabilities with higher interest rates).
Premiums can be increased at the carrier’s discretion. Premiums are guaranteed for the life (term) of the policy.
As your mortgage decreases, your coverage goes down, but your premium does not. You can request the benefit amount be reduced, with premiums reduced accordingly.
If you decide to switch lenders, you have to reapply for mortgage insurance – which could mean an increase in premiums due to an increase in your age. It doesn’t matter if you switch lenders, as term life insurance is attached to you and not to your mortgage.
Underwritten after you submit a claim.
There have been instances where claims were denied because a person’s medical condition was not reviewed until after a claim was submitted.
Underwritten at the time of application.  Prior to an insurance company issuing a policy to you, they will collect blood samples and speak with your doctor regarding your health.
Can be very expensive. Traditionally less expensive than mortgage insurance.

I strongly recommend you consider your insurance options thoroughly — your loved ones depend on it.  A lot of the preliminary work can be done in the convenience of your home by comparing insurance products and prices online at Kanetix  or Easy Insure.

If you’d like to be connected with a life insurance agent, please contact me at Maria@HeritageLending.com, as I am fortunate to work with many insurance professionals who can provide you with plenty of information regarding insurance options.

Wishing you a lifetime of health, happiness and bliss.