Getting life insurance coverage for your mortgage payments can be a daunting task. Let’s start with the name.
These products can be provided to you by:
- a mortgage broker
- your bank
- an independent life insurance broker
- a wealth of other sources and dealers
Yet, the goal remains the same: to provide you with coverage and insure your mortgage and your life.
Options however tend to vary and can get confusing at times, but something is better than nothing. When buying a home or starting a family, insurance coverage is a must in one way or another. Below we will break down some of the key differences to consider when evaluating between getting mortgage life insurance and life insurance.
One thing to note before we outline the differences. If you buy a home with a 20% or less down payment, your mortgage lender requires mortgage loan insurance, which is different from mortgage life insurance, to protect against a possible default. As with most financial products they can get confusing if you do not investigate the details. For simplicity, we will focus on mortgage life insurance for the rest of this post.
- Term life insurance is almost always cheaper. It can cost up to 60% less compared to mortgage insurance, depending on the type of term life insurance policy you get.
- Term life insurance provides coverage for your beneficiary and more flexibility for how the benefit is spent. With insurance, your protection declines over time, and benefits are paid out to the mortgage lender (rather than your beneficiary).
- While mortgage insurance is easier to get, life insurance protection is often superior. It ensures your loved ones receive the full face coverage amount and reduces uncertainty during the post-claims process.