The Advantages and Disadvantages of Mortgage Insurance
Mortgage insurance is convenient. Typically it’s purchased from the bank or financial institution that’s lending you the money for your mortgage, and added on to your monthly payments. However, there’s a cost to this convenience. Mortgage insurance is typically more expensive than life insurance – and while your premiums remain the same for the length of time that you’re insured, the potential pay out shrinks as you pay down your mortgage. Plus, each time you renew your mortgage or change lenders, you’ll need to renew your policy. However, when compared to a typical life insurance plan, mortgage insurance is much easier to arrange, as it often does not require a medical exam. But, no medical life insurance plans make that point a non-issue.
The Advantages and Disadvantages of Term Life Insurance
When investing in term life insurance, you’re protected for the duration of the policy – generally that’s 10, 20 or 30 years, or to a specified age like 75 or 80 – depending on the term that you choose. The amount of money that’s paid out to the beneficiary never changes, even as you pay down your mortgage. But, should you need to renew for another term, you could potentially pay higher premiums depending on your age and overall health. However, term life insurance rates are generally less expensive than mortgage insurance. In addition, your term life insurance policy stays with you for the duration of the policy, even if you sell your home, renew your mortgage, or change lenders. Typical term life insurance policies do require a medical exam in order to secure coverage, which can make the enrollment process more complex than applying for mortgage insurance. But, some insurance companies, like Canada Protection Plan, offer no medical life insurance plans that simply require answering a few yes or no questions to obtain coverage.
What’s best for you?
There are plenty of factors to consider when insuring your mortgage. Both mortgage insurance and life insurance essentially serve the same purpose, but as outlined above, there are some important differences. Ultimately that means it’s imperative that consumers do their research and consider the whole picture – including living costs and insurance needs – before selecting a policy.
