Mortgage Insurance – Term Life v.s. Bank

Your home is most likely the most expensive asset that you will own.  Most people shop around to get the best mortgage rate but many are unaware of the benefits to insuring your home through an insurance  broker as opposed to your bank or mortgage lender.

Nine years ago (prior to working in finances) my husband and I bought our second home.  We were offered a competitive mortgage rate with our bank and also signed up for their mortgage insurance.  Our weekly mortgage payments were high and a friend pointed out that we may want to look into what we were paying to insure our mortgage.  We were shocked to find out that we were paying $70/month for insurance.  We replaced our policy with life insurance that cost $32.40/month.  We saved over 50% replacing our bank insurance with a life insurance policy!

Now that I work as an insurance broker, I see this as one of the BEST ways homeowners can save money.

 

 

Who own’s the policy?
You
Your Bank or Mortgage Lender
Who receives the benefit?
You
You choose the beneficiary and they will receive the full face amount of your policy
Your Bank or Mortgage Lender
They will use the policy to pay out the remainder of your mortgage
Dependability?
Yes 
Underwriting is done at the time of application and once approved will ensure that your policy will pay out.  Your chosen beneficiary will receive the Full Face Amount upon death.
 No
Underwriting is not done until a claim is made meaning you could be declared uninsurable after you die and denied coverage even though you paid your premiums
Cost?
Cheaper rates
An insurance broker can compare rates through several insurance companies and get you the best rate
Posted Rate
There is no cost comparison and when you sign, you accept the rate being offered by your lender 
Coverage amount?
Full Value
Your beneficiary receives the full face amount of your policy
Decreasing Value
Your coverage declines as you pay down your mortgage
Portable?
Yes
You own the policy – even if you change mortgage lenders your coverage is guaranteed
No
If you change mortgage lenders, you need to re-qualify
Flexibility?
Yes
Your beneficiary can use the proceeds to pay off your mortgage, other high interest loans, or any other way the coverage is needed
No
Proceeds from mortgage life insurance can only be used to pay the balance of your mortgage regardless of how little you may have left owing

If you would like a quote to see how much you can save by switching your mortgage insurance from your bank to a term life policy, contact us!

 

Jeanette Ramnarine resides in Belleville, ON where she and her husband are co-owners of Forward Finances.  Her work and financial advice for families has appeared in various forms of media including newspaper, magazine, blogs and television.  She is a licensed insurance broker and investment advisor, bringing a unique and creative approach to her clients with her knowledge and expertise in estate planning and wealth preservation.

 

 

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