Don't Bank on Mortgage Insurance
When protecting your loved ones financially, life insurance is an essential investment. However, choosing the right type of life insurance policy can be daunting. In Canada, many people opt for the mortgage insurance their banks offer, believing it to be convenient and cost-effective. But is mortgage insurance really the best choice for you? In this blog post, we'll share why at Tune Financial, we believe owning your own life insurance policy is better than getting mortgage insurance through the bank.
What is mortgage insurance?
Mortgage insurance is a type of insurance that pays off the remaining balance of your mortgage in the event of your death. It is typically sold by banks and lending institutions and is designed to protect the lender rather than the borrower. In Canada, mortgage insurance is usually sold as a group policy, meaning that your lender will automatically enroll you in the policy when you take out a mortgage. The good news is you can opt out of this for a personal life insurance policy.
Why personal life insurance is a better option?
1. You have complete control when you purchase your own life insurance policy. You can choose the coverage amount, the length of the term, and the beneficiary designations. With mortgage insurance, the lender is the beneficiary, and the coverage decreases as you pay off your mortgage.
2. Personal life insurance policies offer more comprehensive coverage than mortgage insurance. Mortgage insurance only covers the remaining balance of your mortgage. In contrast, personal life insurance can cover other expenses, such as funeral costs, outstanding debts, and your family's ongoing living expenses.
3. Contrary to popular belief, personal life insurance policies can be more affordable than mortgage insurance. The premiums for mortgage insurance are usually bundled into your monthly mortgage payments, and the cost remains the same regardless of your health status. Personal life insurance premiums are calculated based on various factors, including age, health, and lifestyle, so that you can get more competitive pricing.
4. Personal life insurance policies are portable, which means you can take them with you if you move or switch lenders. With mortgage insurance, if you change lenders, you may need to reapply for coverage, which could result in higher premiums or a denial of coverage.
5. Unlike Mortgage insurance, personal life insurance policies require underwriting, considering your health and lifestyle when determining your premiums. This can result in lower premiums for healthy individuals and better coverage overall.
To sum up, personal life insurance policies provide a more comprehensive and flexible option than mortgage insurance. When you purchase a personal life insurance policy, you can ensure that your loved ones are financially protected if anything should happen to you.
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