Mortgage Life Insurance is one of those Insurances that not many individuals totally understand. Most mortgage insurance policies are sold through lending organizations and the insured often pays little attention to the specifics as he or she is focusing on their mortgage. If you look through this type of purchase from your lending company, you will see it is no more than Term Life insurance. To explain this is layman’s terms, the life insurance goes down as the mortgage goes down, but what people don’t realize is that the rates are still going up.
An alternative to mortgage insurance is individual life insurance which is more productive and cheaper.
Individual life insurance can be tailored to the amount of your mortgage, or the insured can combine their life insurance needs with their debt protection needs. The practical answer from a purely financial angle is to join the two requirements. Individual life insurance for a mortgage, will either be Term or Permanent insurance. Term insurance policies are fixed for a declared period of time, such as a 10, 20, or 30-year term. Whereby, a Permanent policy can give level premiums for the insured’s lifetime. Another benefit of permanent policies is they can build a cash lump sum that you may be able to take out at a certain point in the policy.
Additional perks of individual life insurance coverage versus mortgage life insurance:
1. A change lenders or move you do not have to start over again, this policy can be adjusted to reflect the change.
2. The insured person chooses the beneficiary, rather than the lending company.
3. The payment is twice the amount if both spouses died.
4. You are not stuck to either/or, you can have both Permanent insurance and Term insurance under one plan.
5. Coverage can be maintained even after your mortgage is paid-off.
Prepared by Lorne Marr, term life insurance quote professional from Ontario
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