Is mortgage insurance the best option to pay off my mortgage if I die? I get asked this question a lot. Compelled to help inform others who may be wondering the same thing, or those who may be completely unaware that coverage they have may notice  protect them. In short, the answer is, no. Let’s quickly look at just one basic example, among many others, as to why. The rest of the reasons are listed in a separate chart that I created below.

Consider that there’s two types of coverage options for you and your family to completely eliminate your mortgage should you pass away before your mortgage is paid off in full.

• Coverage Option A:
  –  The bank owns the policy.
  –  The bank is automatically the beneficiary of the policy (who receives the money from the policy).
  –  However, you pay the premiums. (Keep in mind, the bank is the owner of the policy)

• Coverage Option B:
  –  You own the policy.
  –  You choose the beneficiary of the policy (who receives the money from the policy).
  –  You pay the premiums for your own policy.

 
Given that both options are intended to pay off your mortgage should you pass away, which of the two coverages listed above would you choose?  If you’re like most who I show this to, Option B is the obvious choice – why would you want choose to pay the premiums on a policy that you do not own and are not able to choose the beneficiary? Makes sense, right? Can I let you in on a little secret? Option A is the mortgage insurance offered through your bank. Yes, that is true. The reality is mortgage insurance is designed to protect your lender, not you or your family. So you may be curious, what is Option B? Option B is an individual life insurance policy. Individual life insurance puts you and your family first. In comparison, it offers a far superior level of coverage, considerable flexibility and usually has lower premiums. Take a quick moment to read the comparison below and I am confident you will agree that individual life insurance is the clear and definite choice to provide you with peace of mind to best protect your mortgage, and more importantly, your family.

Want even more info? Check out:

• CBC’s Marketplace expose on mortgage insurance offered through your bank.
  CBC Marketplace: In Denial
• Huffington Post:  7 Reasons Why You Should Say No to Mortgage Insurance

Hope that helps! Have questions? Want to know your options?  Feel free to contact me anytime!

All the best!

Ryan
204-292-6585
ryan@rlsinsurance.ca

 

Important Questions	Traditional Mortgage Insurance	Individual Life Insurance
I pay the premiums, so I own the policy, right?	Absolutely not. The lender owns the policy and also receives the money if you die. Does it makes sense for you to pay the premiums for a policy that the lender owns and benefits from? Mortgage insurance premiums are also generally higher than individual life insurance premiums.	Yes, correct. You own your policy and you choose who receives the money if you die. Would you agree it makes more sense to pay for a policy that you own and your family can benefit from?
Can I change who receives the money if I die?	No. Never. The lender is, and will always be, the one who will receive the money if you die. Period.	Yes. You can choose, as well as change, who receives the money if you die. The choice is yours. The ones you choose to receive the money can then use it in a way that best suits them at that point in time – pay off the whole mortgage, pay off a portion of the mortgage and refinance, pay other debts, etc. Options are always good, right?
If I die, is my policy  guaranteed to pay?	No, because your medical risk is assessed after you die. If you have a pre-existing medical condition, your loved ones may still be required to pay the mortgage.	Yes, because your medical risk is assessed prior to the issue of your policy. Generally, once a policy is issued, it is guaranteed to pay out.
Does my coverage remain the same?	No. The amount of coverage you have decreases with every mortgage payment you make. Does it make sense to pay premiums that remain the same, when the amount of coverage you receive decreases?	Yes. Your coverage and your premiums will remain level for the length of term you choose.
If I switch lenders, can I take my coverage with me?	No. Your policy is tied to that specific lender. You will need to re-qualify for mortgage insurance with the new lender. What happens if you have a negative change in health and are not able to qualify for mortgage insurance?	Yes. Your policy is fully transportable because it is tied to you. Your coverage remains in effect regardless if you switch lenders.
Can my policy be cancelled?	Yes. A mortgage insurance policy can be cancelled by the lender and is not guaranteed.	No. An individual life insurance policy cannot be cancelled as long as you make your premium payments. Only you can cancel your policy.