Mortgage Life Insurance vs. Term Life Insurance
Which one meets your needs best? Mortgage life insurance pays off your mortgage balance with your lender. Term life insurance can cover your mortgage and it also can be used for other financial purposes.
Mortgage life insurance and term life insurance have positives and negatives. Your choice will depend on your family’s needs. If you understand the differences between mortgage life insurance and term life insurance that will help you choose which one is right for you.
Your Western life insurance expert will take the time to go over the pros and cons of each type of insurance.
We’ll explain the differences in detail between term versus mortgage insurance to allow you to make an informed decision that works for you and your family.
Mortgage life insurance protects your lender and pays back your mortgage debt. Term life insurance protects your beneficiaries against debts. Let’s get into the details.
Here’s what you need to know:
What is mortgage life insurance?
Mortgage life insurance pays all or part of your mortgage debt and it can help your loved ones stay in the family home if you die.
It can also work for new homeowners who may be concerned that an unexpected death or illness could leave their loved ones with a large mortgage.
With mortgage insurance, the money goes directly to the bank or lender to pay off the mortgage.
When choosing mortgage life insurance, remember to take into account your mortgage’s outstanding balance.
Pros of mortgage insurance:
- It may be easier to qualify for coverage than with personal life insurance because it has a simple application process.
- Mortgage life insurance generally does not require a medical exam and it may have no health questions, either.
- Mortgage life insurance can free up money you may get from other insurance policies.
- For example, the money you get through insurance from employer benefits, or a personal life insurance policy could go towards expenses other than the mortgage, such as tuition fees for your children.
- Mortgage life insurance can give you and your family peace of mind that the mortgage will be paid off.
Cons of mortgage insurance:
- Mortgage insurance can be more expensive because premiums will depend on your age when you apply for the policy, the initial insured amount of your mortgage and the premium.
- Mortgage life insurance rates change from year to year.
- The payout goes directly to the bank or lender to pay off your mortgage.
- There’s no extra money to cover other expenses, and you don’t get to leave any money to your beneficiaries.
- Mortgage life insurance can be expensive because unlike other types of life insurance, premiums aren't based on your health.
Mortgage insurance ends either when mortgage is paid off or when you switch lenders—whichever occurs first.
Your Western life insurance expert will welcome a discussion on the pros and cons of mortgage insurance with you.
What is term insurance?
Term life insurance comes with a death benefit. A death benefit is the amount of money given to your beneficiaries after you die. The exact amount they’ll receive depends on the policy you buy.
A term insurance policy expires after a pre-determined number of years, usually 10, 15, 20 or 30.
You will choose the length of your policy and you’ll also select the amount of your death benefit, which is the tax-free amount your beneficiary, or beneficiaries, will receive when you pass away.
When choosing term insurance, make sure your debts are covered to avoid leaving behind major expenses for your loved ones.
Pros of term insurance:
- It tends to be cheaper than mortgage insurance.
- Term life insurance doesn’t have to be a life-long commitment.
- It can cover your mortgage, funeral expenses and other debts unlike mortgage insurance which only pays off your mortgage.
- When your term insurance ends, in most cases, your coverage can renew automatically.
What are the cons of term life insurance?
- Once the term ends, the coverage also ends and your beneficiaries don't receive any payment.
- Term life insurance doesn’t build any cash value, which means it doesn't include a savings account to borrow from, withdraw against, or grow.
- Your needs may change as your life changes and term insurance may no longer be suitable for you and your situation.
- Though the maximum age limit varies by insurer and term length, once you reach 60 or older it usually becomes more difficult to buy term insurance and you may be limited to buying a 10, 15 or 20-year term.
- The premiums typically increase when you renew term life insurance.
Discuss with your Western insurance expert whether mortgage insurance or term life insurance suits your situation.
Plan how life insurance can meet your family’s needs
Life insurance is about protecting your family for the future and helping to meet their needs. As your circumstances change over the years, it’s a good idea to keep reassessing how your life insurance can protect your family.
Your Western life insurance expert can speak to you about how life insurance can help protect your family over the years.
Western Insurance has over 40 licensed LIFE INSURANCE EXPERTS across Canada. Our experts are available now in branch or on the phone to help you navigate the life insurance journey that will give you the right policy to protect yourself, your investments, and your family.
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