Mortgage Insurance vs. Life Insurance
Purchasing a house is likely the biggest investment of your life, and insuring the mortgage makes sense – but there are options. Your lending institution will want to sell you mortgage insurance. Purchasing Life Insurance to cover the amount of the mortgage offers much greater flexibility.
Mortgage insurance only covers the outstanding balance of the mortgage. The benefit amount continues to decrease as you pay off your mortgage, yet the cost stays the same. Life Insurance has a level death benefit for the duration of the policy, leaving additional protection for your family.
The bank can change the policy and/or rates of your mortgage insurance at any time. With Life Insurance your premiums are guaranteed for the length of the policy (10, 20 or 30 year terms or lifetime), and the renewal rates quoted when you purchase a term policy are guaranteed.
With mortgage insurance, the lending institution is the beneficiary. On a Life Insurance policy you name the beneficiary.
Mortgage insurance does not offer any price advantages to healthy non-smokers, while life insurance rewards healthy lifestyles with premium discounts.
If you refinance or renegotiate your mortgage, or move, you cannot transfer your mortgage insurance policy. You will have to re-qualify at current rates. You can increase or decrease the amount of your life insurance or convert it to permanent protection if your needs change. Most Term Life Insurance policies are guaranteed convertible for the duration of the policy, or to a certain age.
You’ve done your homework for buying your new home. Take a little bit of time to investigate the option of Life Insurance to cover the mortgage. You will have better protection, and often better rates!