Mortgage Insurance or Life Insurance: Home buyers choices

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Lets say you bought a new house or condo, and you are considering mortgage insurance.  Since mortgage insurance really is a form of life insurance, they’re both the same.  Potatoe, Potaahto, right?  Not so fast…..lets look at some key differences.

Mortgage Insurance vs. Life Insurance

Life Insurance means YOU are the beneficiary

In Life Insurance, YOU are the beneficiary, as opposed to mortgage insurance where the bank is automatically named as the beneficiary.  This is important, because it means that YOU decide how the insurance payout is used….as opposed to the payout only going against the mortgage balance.

The Payout amount remains the same

With mortgage insurance, only the remaining balance is paid off in case of your demise.  So as you start to pay off your mortgage over the years, the benefit of your mortgage insurance actually decreases over time.  With Life Insurance, the payout remains the same.

Guaranteed Payout

With Life Insurance, underwriting occurs at inception of policy as opposed to waiting until something happens to find out whether you qualify for the coverage.  The added benefit of this is that the premiums are based on you and your current health.  Discounts for non-smokers and age and sex apply in the Life Insurance option.

This last part is actually very important.  A good friend of mine just learned the hard way: His mom had passed away and after about 18 months, the bank still had not agreed to pay off the mortgage insurance, fighting the family every step of the way.  As my friend put it: “I’ll never get mortgage insurance again.  Bo, the agreement is 12-pages long, and 11-1/2 of those pages are designed to get the bank out of paying the benefits”….

Probably the biggest factor IN FAVOR of getting mortgage insurance is the simplicity of signing a document at the same time as signing the mortgage application.  Simple,…easy…..done!  As my friend put it...just pray you never need it!

Here is a summary of the differences:

Mortgage Insurance or Life Insurance: Home buyers choices

If you need a referral to a very knowledgable life insurance rep, call me anytime…..

If you’re thinking of buying your first (or next) house or condo, check out these 7 biggest mistakes made by home buyers.

And beware of the Closing Costs when buying a home in Winnipeg.

 

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Mortgage Insurance or Life Insurance: Home buyers choices

41 Comments on "Mortgage Insurance or Life Insurance: Home buyers choices"

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Emmy
Guest
“If you switch lenders, you lose the coverage”. That right there is enough for me to say that I don’t like mortgage insurance an see that it can make you feel locked into a lender that may not be operating in your best interest. It’s bad to feel like a prisoner in your own home. This mortgage insurance terms should… Read more »
Angelo
Guest

Well I don’t like the fact that in mortgage insurance only the remaining balance is payable upon my demise. This sounds super risky and could leave very little for my family.

Mariano Oleson
Guest

Well anything where the bank or the government is automatically named the beneficiary can’t be good. Thanks for this important information!

Vivien Coder
Guest

Yeah amen to that! I don’t want the bank to be any beneficiary on my policies!

Everheart
Guest

I’ve never heard this comparison broken down before in my life. Many times we just sign up (or get signed up) for things we don’t even fully understand. This for breaking this down in an easy to understand way.

Ria A.
Guest

Hmmm so the benefit of mortgage insurance actually decreases over time. This hardly seems worth it.

Dawn
Guest

I would prefer life insurance since I make the decisions about the beneficiary and do not have to worry about the bank keeping it from my family. The loss of a family member is difficult enough without added stress.

Amber
Guest

I was never aware that there was a such thing as mortgage insurance. This article was very informative, and based on what I have read I believe life insurance would be a much better idea.

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