Mortgage vs life insurance: Which is best?
Mortgage vs life insurance: Which is best? It is one of the most common questions that I am asked. If you’re buying a home or renewing an existing mortgage, you may be offered life insurance by your lender or broker (mortgage protection).
Mortgage life insurance is typically marketed towards new homeowners who may be concerned that an unexpected death or illness could leave their loved ones with a large mortgage. Personal life insurance can perform a similar function for you, but isn’t tied to just covering your mortgage. It’s designed to provide your beneficiaries with money in the event of your death. Its flexibility allows your beneficiaries to use the money for whatever purpose they wish (including paying the mortgage out). It’s an individual insurance product.
Mortgage life insurance covers the balance of your mortgage, which decreases as the mortgage is paid down. Personal life insurance coverage, meanwhile, typically stays the same, but also may decrease, and isn’t linked to your mortgage.
Mortgage life insurance coverage ends when your home is paid off. A personal life insurance policy is unaffected by your mortgage ending and can keep providing you and your family with protection in the years that follow. Mortgage life insurance provided through a financial institution is typically quick and easy to arrange, and usually only requires answering a few health-related questions. Buying personal life insurance, on the other hand, typically takes longer and involves delving into your medical history.
Mortgage life insurance typically higher than on term life insurance. Moreover, the bank does not give you options, there is only one available product, while with insurance company, the client may choose the product, term and coverage that fits his or her individual needs.
My advice to any client who is getting a mortgage or goes through a renewal is to review the option for individual life insurance. It will save the client money and provide a better-quality product.