Life Insurance Vs. Mortgage Insurance

How do mortgages work?

Mortgages are a loan given by a financial institution, like a bank, in order to purchase property. The loan is secured against the value of the property purchased, ensuring that should the borrower default on their payments, the lender has the right to take possession of the property and recover any outstanding funds. Depending on what type of mortgage you take out, repayment can be made over a fixed term such as 10 or 15 years with pre-determined monthly payments known as installment payments. Alternatively you can choose an adjustable rate mortgage where your interest rate changes depending on external factors such as market conditions and inflation. 

What is mortgage Life insurance? 

Mortgage life insurance is an insurance policy that pays off the homeowner’s mortgage if they pass away. It provides financial security by ensuring that the mortgage will be paid off even if household finances are no longer available. This type of life insurance is designed to cover the balance of a home loan in case of death or disability, which helps protect the homeowner's family from distress and financial hardship.

How Does it Work? 

Mortgage life insurance works similarly to other types of life insurance policies by providing a death benefit when the policyholder passes away. The insurer pays out the death benefit directly to whichever party holds the mortgage - usually a bank or other financial institution - so that there are no outstanding debts left for surviving family members. 

The amount of coverage varies, but typically covers the remaining balance on the home loan including principal, interest and other fees. The premiums for this type of coverage can vary depending on your age, health and lifestyle factors but generally remain relatively low because most policies are taken out over a shorter duration (e.g., until retirement). 

Is Mortgage insurance Worth it? 

For many homeowners, mortgage life insurance can provide peace of mind knowing that their loved ones won't have to face a significant financial burden should they no longer be around. With a few exceptions, such as those who have significant assets or have already saved up enough money to pay off their mortgages outright, most people can benefit from this type of coverage. 

What is Life insurance? 

Life insurance is a way to help protect your family financially if something unexpected were to happen to you. It is a type of insurance policy that pays out an agreed sum of money, called the death benefit, in the event of the policyholder’s death.

How does it work? 

Life insurance can help provide financial security for your loved ones by helping them to meet their financial commitments such as paying off the mortgage, providing an income replacement or covering living expenses. It can also be used to cover funeral expenses and debts. It can provide peace of mind knowing that your loved ones will be taken care of in your absence. 

Generally speaking, there are two types of life insurance policies: Term life and Whole life (also referred to as permanent life insurance). With Term Insurance, a policyholder pays premiums for a defined period (usually between 1-30 years) at a fixed rate and if they die within this period then a lump sum payment is made to their beneficiaries (dependents). Whole Life Insurance provides lifetime protection until death with no fixed term but has higher premiums than Term Insurance due to providing lifelong cover plus other additional features such as guaranteed acceptance regardless of underlying medical conditions. 

Is life insurance worth it? 

Whether life insurance is worth it depends on individual circumstances but generally speaking it offers protection for those who want financial security for their families should something unexpected happen (death) during the term of the policy. It often covers even more than just the mortgage, and will never decrease, no matter the amount of your mortgage.

Mortgage Life Insurance vs Life Insurance - The Main Differences

Mortgage life insurance and life insurance are two popular types of insurance policies that provide financial protection for those who purchase them. While there are many similarities between these two types of coverage, there are also some key differences that should be considered before making a decision about which one is best for you.

How to choose the perfect product for me?

When choosing between mortgage life insurance and life insurance, it’s important to consider both short-term and long-term needs as well as budget concerns. Mortgage life insurance provides an affordable way to meet immediate financial obligations in case something happens; however, it may not be sufficient over time if additional money is required due to inflation or increased living expenses during retirement years. Life Insurance offers more flexibility with cash value options but requires higher premiums in order to get enough coverage over time periods longer than 30 years or when permanent coverage is desired. Ultimately, both types offer valuable protection but it’s important to do research before making a selection in order to find the right fit for your individual situation and goals.

6 Reasons Why it’s best to use Term Life Insurance as mortgage protection

1. Lower Cost: Term Life insurance cost, especially for healthy individuals of younger ages, is much lower than mortgage insurance. In fact, a typical 30-year-old male could purchase a 20-year, $500,000 policy for less than $30 per month - far less than the average cost of mortgage insurance. Furthermore, since term life insurance premiums are fixed according to the chosen coverage amount and length of policy term, you can rest assured that your payments will remain constant throughout the life of your policy. 
2. Guaranteed Coverage: Once you obtain a term life policy and begin making premium payments on time and in full every month, your coverage will never be cancelled or decreased as long as you continue to make those required payments. On the contrary, while mortgage insurance usually offers “guaranteed acceptance” without any underwriting process whatsoever, that coverage may still be reduced or even cancelled if you fail to pay your monthly premium on time. 
3. Life Insurance follows you: A fundamental advantage of term life policies is that they are portable - meaning that they travel with the insured person regardless of their geographical location or home address. This means that if you move out of country at some point during your policy's duration or move into different residences within your current province, there's no need to cancel or reapply for new coverage; your existing policy will simply follow you to each new address and residence as needed. This is in stark contrast to many forms of mortgage insurance which almost always require termination when moving from one home to another prior to closing on a new loan. 
4. Life insurance offers a reliable payout: One of the main benefits of life insurance is that it provides a guaranteed payout in the event of death. Unlike mortgage insurance, which pays out only when certain criteria such as age and/or healthcare status are met, life insurance offers a reliable financial safety net for families regardless of any pre-existing conditions. Furthermore, life insurance can also offer additional peace of mind by providing living benefits should an insured person become terminally ill or disabled. 
5. You name your life insurance beneficiaries: With term life insurance policies, you have the freedom to name your own beneficiaries – this means that you can designate who receives the proceeds from your policy in the event of your death. This gives you more control over how your money will be used if something were to happen to you - whether it's providing funds for immediate expenses associated with funeral services, protecting long-term income needs like college tuition or estate taxes, or simply ensuring that you provide adequate support and security for your loved ones after you're gone. 
6. Life insurance is flexible: One of the main advantages of term life insurance over other forms of coverage like mortgage insurance is its flexibility and level of customization available for policyholders' specific needs. Term plans are designed so that premiums may be adjusted based on changing circumstances – so if someone's finances take a sudden turn for the worse, they can always opt for lower premiums without sacrificing coverage limits too much. Additionally, many insurers offer riders which allow customers to add even greater levels of security and protection at an additional cost; these include accelerated death benefit riders which pay out upon diagnosis with a terminal illness as well as waiver-of-premium riders which cover premium payments in case disability prevents an insured from working or earning an income.

The importance of reviewing your insurance coverage

Having up-to-date knowledge of your insurance coverage can help you to make informed decisions about the appropriate coverages when it comes to protecting yourself and your family.

By taking the time to review your insurance policies regularly, you can ensure that you have the right level of protection in place for any risks that could affect your finances. 

This may include determining whether or not additional coverages are necessary due to changes in life circumstances such as marriage or starting a family. 

It is also important to review existing policies to see if they need updating due to inflation or other factors such as advancements in technology.