Is Mortgage Life Insurance right for you?

For most Canadians, purchasing a home can seem quite overwhelming, with so much information (e.g., your mortgage, land transfer tax, lawyer fees, etc) that often your Mortgage Life Insurance becomes a second thought. Many Canadians end up purchasing life insurance through their lender without really understanding what they have purchased.

Although the mortgage insurance offered through your bank/financial lender is not a bad plan, it does come with a few drawbacks:

• Plan Structure – Normally are not competitive with what’s available.
• Mortgage insurance is non-transferable
• Who’s really covered? – Are you protecting the bank or the people you care about?
• Cost – For the majority of the time, you’ll save money when you shop around.

An alternative to a lender’s mortgage insurance plan can be obtained directly from an insurance broker. This enables you to have a superior plan at a lower cost.

Let’s take a deeper look at these three points

Plan Structure

There are a number of disadvantages when it comes to purchasing life insurance through your lender. One major disadvantage is the plan structure. When you purchase life insurance through your lender you are purchasing depreciating coverage. Meaning, your cost to own the coverage stays the same every month however the amount of coverage you have decreased. Most other life insurance plans offer level coverage. Meaning that as your pay down your mortgage, your coverage remains the same. Giving your beneficiaries a chance to pay off the mortgage and still have some benefits left over.

Mortgage insurance is Non-Transferable

Another major flaw in this plan structure happens when you want to change your mortgage. Let’s say you’ve purchased your house and a few years have gone by and you found a better mortgage and now you want to switch your mortgage. Unfortunately, that means you will have to switch your coverage as well because mortgage insurance is non-transferable. This will end up costing you more. Not to mention, if you became sick, or became critically ill, you might not be able to purchase any coverage. Which would end up financially hurting your loved ones.

Your Beneficiary

When you purchase coverage through the lender, the lender becomes the beneficiary. However, when you purchase life insurance directly through an insurance company or life insurance broker your loved ones become the beneficiary and receive the benefits if something were to happen.

Think of it this way, if something were to happen to you, would you want the benefits being paid to the bank or your loved ones?

Cost to Own

What shocks most people is when they find out they can get a better plan at a lower cost. By going direct to an insurance company or life insurance broker you save as much as 35% when comparing to mortgage insurance.

In short, you can get coverage that:

• Costs less
• Has level coverage (not depreciating)
• Is transferable (regardless of how many times you change your mortgage)
• Gives your loved ones control of the benefits (not the banks)
• You won’t have to worry about re-applying if you change your mortgage

   

All by simply going directly to an insurance company or life insurance broker.

Don’t be like many Canadians who are under the impression that all mortgage insurance plans are relatively the same and since the lending institution is offering them the best mortgage rates, the insurance plan must be competitive as well. This is simply not true.

Get the right coverage for you, and to shop the market to find the best price for you CLICK HERE.