If you’re a homeowner, you probably have mortgage insurance or have at least heard of it, but if you’re in the process of buying your first home or are renewing your mortgage and reevaluating a few things this article is for you.
Mortgage Insurance might seem like a non-negotiable for a homeowner, but did you know that there is another policy available to you that will do the same job as mortgage insurance and will serve you better?
You spent a lot of time looking for the perfect home for your family, and it is imperative you put the same care into finding the insurance that is right for you. Let’s look at term life insurance vs. mortgage insurance so you can make an educated decision on which one is right for you and your family.
Mortgage Insurance
Mortgage insurance is a type of life insurance that you purchase from your mortgage lender that offers protection if the borrower passes away. Unlike other life insurances, the payout does not remain the same, and it only covers the amount owing on your mortgage. So as you pay more of your mortgage, your payout decreases.
Term Life Insurance
Term life Insurance offers broader protection and can be purchased from any life insurance company or broker. It covers you for a set period. It is recommended that you choose a term that will offer you coverage until your dependents are financially independent, and your mortgage is paid off. The premiums are based on your demographics, health, and term length.
| Questions | Mortgage Insurance | Term Life Insurance |
| Do I own my policy | No, the bank owns the policy | Yes, you are the owner |
| Who can be the beneficiary? | Only the bank will receive the benefits of the policy | Anyone you choose |
| When does coverage end? | Coverage ends when the mortgage is paid | You choose the term of you can choose a permanent policy |
It is important to note that mortgage life insurance is not the same as mortgage insurance, which protects the lender should the borrower die, or otherwise be unable to meet the contractual agreement or property insurance.
The main difference between life insurance and mortgage insurance is that mortgage insurance pays the remaining balance of your mortgage to the bank if you die. Term Life Insurance pays the entire death benefit to your beneficiary.
What this means is that as your mortgage balance decreases so does the insurance payout, but your premium stays the same. Whereas term life insurance payout remains the same for the duration of your policy.
Although insurance always depends on you and your family’s needs, it is so important to get educated on what is out there so you can make the right decision. Are you interested in purchasing life insurance? Call now for a free no-obligation phone call to get advice on how to ensure a financially stable future.
