Buying a home will likely be the largest purchase you make in your lifetime, which is why protecting it should be a key part of your overall financial plan. For this protection, chances are someone has suggested you buy insurance-whether it's mortgage insurance, term life insurance or both.
To help you understand some of the distinctions between the two, we've compiled a list of some of the most common questions we hear and answered them.
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| What is it? |
Mortgage life insurance is an insurance policy that pays the balance of your mortgage if a person listed on the mortgage dies. |
Term life insurance is an insurance policy that pays a death benefit if a person listed on the policy dies. The money can be used to pay off a mortgage, other debts or help with the day-to-day expenses of the surviving family members. |
| How much insurance coverage can I get? |
The amount of your coverage is determined by the amount of your mortgage. |
You can choose any amount of coverage. |
| Who receives the death benefit from the insurance policy? |
The mortgage lender is the beneficiary and receives the death benefit. |
The beneficiary you have designated receives the death benefit |
| If changing mortgage lenders, does the policy stay in force? |
No, usually you will have to get, and qualify, for a new mortgage insurance policy. |
Yes, you own and control the policy. |
| Does the policy stay in force if I sell my home and buy another? |
No, usually you will have to get, and qualify for, a new mortgage insurance policy. This could be a deterrent given that many people end up buying 2 or 3 homes over the course of their lifetime. |
Yes. Your term life insurance policy stays in effect for the duration of the term, regardless of how often you move. Your policy will stay in force so long as your premiums are paid and you wish to maintain the coverage. |
| Will I always have the same amount of coverage? |
No, as you pay off your mortgage the amount of coverage decreases as well. |
Yes, the amount of coverage you have chosen will stay the same for the term of the policy. You can opt to increase or decrease your coverage at any time. If you choose to increase your coverage however, you will have to re-qualify. |
| What happens to my coverage once my mortgage is paid off? |
Without a mortgage there is no longer a need for mortgage life insurance so coverage is no longer available. |
Your coverage will continue for as long as you want to renew the coverage or until you choose to cancel. |
Your financial plan should include term life insurance
Even if you decide mortgage insurance is the way you want to go to protect your home, a well-designed financial plan should include term insurance as well. A mortgage insurance policy only pays off the mortgage and leaves nothing for your other debts or your family's living expenses.
Compare term life insurance quotes today.
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