A mortgage is likely the largest investment many of us will ever make so having mortgage insurance in place can give you some peace of mind while paying off your debt.
Mortgage insurance protects your family from significant debt and allows them to keep their home in case you are unable to make payments due to critical illness or untimely death. To take full advantage of mortgage insurance, you need to know that there are two very different ways of insuring it..
How you choose to insure your mortgage can make a big difference in the benefits offered to your family. There are two main ways of insuring your mortgage:
1) Mortgage loan or default insurance from the bank or lending institution
2) Mortgage life insurance policy from an insurance company
The key things to consider before making your choice are:
Rates: The rate or premium for mortgage insurance offered by a bank or lending institution is calculated based on the original amount of the mortgage. Since the balance owing on your mortgage will be declining, you might expect the premiums to decline as well but they do not!
Beneficiary: when you buy mortgage insurance from your lender, the lender is automatically the beneficiary of the policy.
Amount insured vs. benefit paid: although you insured the original amount of your mortgage, only the remaining balance of the mortgage is paid should you pass away.
Rates: The premium for mortgage life insurance offered by an insurance company is calculated based on the original amount of the mortgage or whatever amount you have chosen. Regardless of the declining balance owing on your mortgage, you continue to be insured for the original amount chosen.
Beneficiary: you choose the beneficiary of the policy when you buy mortgage insurance from an insurance company.
Amount insured vs. benefit paid: if you pass away, the full amount insured is paid to your beneficiary who can use it however they choose.
Don’t feel pressured to buy mortgage insurance from your mortgage lender. Let them know you want to check into the insurance you already have to see if it is sufficient. Then you can think about your options and decide if mortgage life insurance is the right choice for your family.
If you have any questions about mortgage insurance or life insurance, or would like to discuss your options further, feel free to call us at 1-800-731-2228 or email us at firstname.lastname@example.org.
Mitchell & Whale Insurance Brokers was recently voted #1 in Ontario by the Insurance Business Canada magazine. Read more