Why mortgage insurance doesn’t work for everyone
You just bought your house – congratulations! You can’t wait to move in and make your house a home.
With all the excitement that comes with a new house, I’m afraid there’s a downside: how on earth are you going to pay for this thing?
If you’ve felt that sickening feeling like I have (and still do), I’m sure we’re not alone. Although we have our health today it might not always be this way…
What happens if you suddenly pass away and you still have a large mortgage? What will happen to the home you worked so hard to make? How will your spouse or family cope? Will your family be able to survive financially after dealing with such a huge emotional loss?
Serious questions that require some serious answers for sure…
This is why having an adequate amount of insurance is important, to protect your family in the event of a catastrophic loss. Yet which product is right for you? Mortgage insurance or individual life insurance?
I have my bias but I’d like you to check out this table to help you make your own decision:
Individual Life Insurance
|The agent you are dealing with is probably not a qualified insurance professional, unable to look at all your insurance needs.||The agent you are dealing with is likely a qualified insurance professional, specifically trained to look at all your insurance needs.|
|Your benefit amount declines as you pay off your mortgage.||Your benefit amount remains steady as you pay off your mortgage.|
|Mortgage insurance may or may not be cheaper than individual life insurance.||Individual life insurance may or may not be cheaper than mortgage insurance.|
|Your policy is not portable; if you switch lenders or move to another home.||Your policy is portable; if you switch lenders or move to another home.|
|When the lender offers mortgage insurance, the lender is the beneficiary.||With individual life insurance, you decide who the beneficiary is.|
|If you die, only the mortgage balance gets paid.||If you die, the mortgage and/or other liabilities can get paid.|
|Mortgage insurance is not convertible (to a permanent life insurance plan).||Individual life insurance is convertible.|
I suspect the last thing on your mind after you bought your new home is life insurance, I get that. But before you ink your name to any mortgage insurance consider some of the drawbacks, inferior coverage with potentially higher premiums when compared to individual life insurance.
I’ve declined mortgage insurance in favour of holding individual life insurance for some of the reasons above but also many more. I encourage you to do your own homework, understand how the underwriting processes work, before you sign any insurance policy. Be very mindful that with mortgage life insurance, the underwriting isn’t done until you die. This means that if you die, some insurance company will then check to see if you qualified for life insurance. Not a great idea nor product.
When in doubt consider consulting a life insurance specialist who can help you unearth the best protection benefits for you and your family. Mortgage insurance is definitely convenient but remember convenience usually comes at a cost.
What’s your take on mortgage insurance? Do you favour life insurance over mortgage insurance like I do?