Mortgage Insurance vs. Life Insurance
You just bought a house. Now you are sitting with your mortgage broker, or your bank, and you are offered Mortgage Insurance. The questions that come to your mind probably are:
- What do I do?
- Do I need to take this coverage?
- What are my options?
- Can I take it now and cancel it later?
What do I do? Mortgage insurance is better than nothing, but it does have some issues. See the chart below for a comparison between Mortgage Insurance and Term Life to protect your mortgage.
Do I need to take this coverage? In Canada, tied selling is not legal. As such, you do not need to take the coverage offered by your lender. They will still provide financing for your mortgage.
What are my options? You can take the lender’s mortgage insurance or you can find a good insurance broker and get life insurance.
Can I take it now and cancel at any time? So you took the coverage and now you are wondering what you can do. You can cancel your mortgage insurance with no penalty. Usually 30 days notice in writing will do the job. However, you should apply for your life insurance and wait for the policy to arrive before cancelling. As I said earlier, mortgage insurance is better than nothing. Once your broker hands you your new policy, you can cancel your mortgage policy right away.
CBC Market Place did a review of the coverage offered by some lending institutions. You can read the article and watch the video at:
http://www.cbc.ca/player/News/TV+Shows/Marketplace/ID/1581783345/
If you have questions or want a quote, always feel free to call us. We will provide a no obligation quote from the top 25 Life Insurers in Canada.
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Mortgage Insurance
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Term Life Insurance
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Ownership of the contract
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The Bank or Lending Institution
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You
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| Amount of insurance |
Declines as you pay off your mortgage
|
Remains the same unless you change it
|
| Cost of insurance |
Remains the same even though your coverage decreases
If you move houses or mortgage companies, your new cost of insurance will be based on your new age and therefore higher.
|
Remains the same for the length of time you choose.
You can move houses, mortgage companies, or provinces.
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| Change in contract |
Can change without your permission
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Only you can make changes, as long as you maintain the premium payment
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| Who is paid on death |
The Bank.
Only the outstanding balance is paid
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Your chosen beneficiary.
The full amount of the insurance contract
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| When is underwriting done |
In most cases, at time of claim. This means the insurance company may determine you are not eligible for a payout even though you have been paying premiums. For instance, a claim may be denied because an investigation of your medical records indicates you once had high blood pressure or high cholesterol.
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When you apply for individual insurance through a licensed insurance broker your medical history will be examined before a policy is issued. The insurance broker will ask detailed questions and may arrange for a nurse to conduct a physical. Once a policy is issued, it is guaranteed (Even if you have some existing medical problems).
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Costs:
In most cases, Term Life is less expensive then Mortgage Insurance. ($250,000 of coverage is illustrated below) Mortgage premiums are a sample from one lender.
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For a couple aged
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Monthly bank mortgage insurance premiums*
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Term 10 monthly life rates Provided through
Marathon Benefit Corp
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Term 20 monthly life rates Provided through
Marathon Benefit Corp
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|
30
|
$35.30
|
$19.80
|
$29
|
|
35
|
$35.50
|
$24.08
|
$39
|
|
40
|
$76.25
|
$31.05
|
$53
|
|
45
|
$113.25
|
$43.20
|
$85
|
|
50
|
$159.25
|
$65.25
|
$138
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200 – 321 – 19 ST NW Calgary Alberta T2N 2J2
Phone: (403) 238-7343 Fax: (403) 206-7400
Toll Free: 888-488-7343
www.marathonbenefits.com
