What does mortgage loan insurance do?
If you’re carrying a mortgage it’s likely that your bank has offered mortgage insurance in case of death. The mortgage protection will pay-off the loan should an insured die prematurely.
Two ways to buy mortgage insurance in case of death:
- life insurance policy from an insurance company or
- mortgage with life insurance protection with your bank or mortgage lender.
Is it necessary to get mortgage insurance?
Life insurance can be a necessity for ensuring your loved ones are taken care of after you’re gone. It can help them pay for funeral expenses, the costs of everyday living and much more. But one of life insurance main advantages is that it can pay off outstanding debts, including a mortgage.
Is mortgage insurance worth it?
A home is probably the biggest asset you’ll own, and a mortgage is one of the biggest debts you’ll take on in your lifetime to buy it.
“Mortgage debt in Canada stood at almost $1.63 trillion dollars in the third quarter of 2020, according to Statistics Canada,” says Wouters. “Life insurance can pay off the mortgage for pennies on the dollar when a breadwinner dies, and this can save many thousands—perhaps hundreds of thousands of dollars—in interest payments, too.”
You and your family can gain peace of mind in that they can continue to live in your home and in the same neighbourhood you chose with their best interests in mind. If it’s worth it to buy a home, for many it’s worth the additional costs of insurance. Consider what would happen if a critical illness struck or the breadwinner suffered a disability. There’s coverage for that, which can cover the mortgage or mortgage payments for a period of time.
So, life insurance vs. mortgage insurance, which is best?
Important features included in term insurance and not offered in bank mortgage insurance?
Cost comparative
If you’re a non-smoker and in good health, you can save nearly 50% on what your bank is charging you. For example; Micela, a female aged 40 has a 20-year mortgage with a large Canadian bank.
- The monthly premium for her bank mortgage life insurance coverage is $56.23.
- A 20-year term insurance policy with a leading Canadian life insurance company is $20.48, monthly.
By choosing a personal term insurance policy to ensure her mortgage, Micela saves $35,75 monthly
Important fact; you can opt for another insurance plan without affecting the rates and terms stipulated in the loan agreement. The insurance is independent of your loan.
Term life insurance is the product of choice to ensure your mortgage when considering low-cost insurance, large face amounts, and a predetermined duration
Mortgage insurance vs. term life insurance: How do they each work?
Term insurance policies protect the insured, you, and not the financial institution. We compare 20 plus mortgage insurance companies that offer term insurance to cover your mortgage so you save money.
Contrarily to bank insurance, you own the insurance policy therefore you’re allowed to modify the insurance plan when deemed necessary.
- Beneficiaries:
You choose your beneficiaries, unlike bank coverage, they own the mortgage insurance plan and they are the sole beneficiary of the policy. - Can you move your policy from one bank to another?
With term life insurance, your policy stays with you even if you transfer your loan to another company. Not so with Bank insurance. If you move your mortgage to another bank, you’ll have to prove that your health is still good. Prices will also increase. - Does the amount insured decrease over time?
With term life insurance, you’re getting mortgage protection and the chance to financially protect your beneficiaries or loved ones. Plus, the amount of coverage you buy doesn’t decrease over time, it’s a cost-effective solution. With the bank, the cost stays the same. But the benefit decreases as you pay down the loan. Hence, the cost increases over time as the sum insured decreases - When is your insurability determined?
With term life insurance you’ll have to answer some medical questions or take a medical exam before you’re approved for coverage. Once you’re approved, the insurer won’t ask for any additional medical information later on. With mortgage insurance, a bank may ask some medical questions when you apply. However, if you make a claim after you’re approved, your bank may ask for additional medical information.* At that point, they may discover some conditions that disqualify you from receiving payment on a claim. The underwriting process is called post issue.
Read an article by Sun life about how term insurance can offer you better benefits and more often save you money:
https://www.sunlife.ca/en/explore-products/insurance/mortgage-protection-insurance/
How much does mortgage insurance cost?
Call 514-351-3692 and speak with a licensed insurance advisor or complete the quote form below and receive your quote via email.
Ready to upgrade your mortgage insurance and save money?
More often term insurance provides better benefits at lower rates. Doesn’t it make sense to compare?
