You have purchased a new home and now need mortgage insurance. Mortgage Life Insurance is a type of insurance designed specifically to repay any outstanding mortgage debt in the event of homeowner death or long-term disability. It protects the lender and investor, not the homeowner.
You can buy the insurance from a mortgage lender or a life insurance from a life insurance broker. What is the difference?
A lender’s policy covers;
- Only the person(s) listed on the mortgage. If two people are covered there is only one payout and the other loses the coverage
- Only the balance owning on your mortgage.
- The mortgage lender is automatically the beneficiary
- The coverage amount decreases as the mortgage balance decreases and the premium remains the same.
- When the mortgage is paid off, the coverage ends.
On the other hand a personally owned Life Insurance policy covers;
- You, and your family, even those who are not responsible for paying your mortgage.
- It can cover your mortgage, and your debts such as your line of credit, credit cards, last expenses, ongoing income for the family,etc.
- You designate the beneficiary and how it can be used as paying your mortgage, medical expenses or your child’s education – whatever is best for you in your situation
- The amount of coverage stays the same for as long as you own your policy , unless you decide to change it.
- Your coverage is not tied to your mortgage, therefore, you can carry it with you if you move again.