Mortgage Insurance

Are you planning to buy a home, or do you already own? You would be well advised to have life insurance on your mortgage. You would even be better off if that insurance is a personal plan, rather than a plan with the bank. It is wise to protect yourself and your family. If you are single, own a home, and you pass away then your home is paid for and that asset could then be passed to your family and/or friends. If you own a home with your partner/spouse and you happen to pass away, then your partner would not have to worry about paying the mortgage since the home would be paid for.
In a lot of cases, home owners tend to purchase mortgage life insurance through the bank or credit union with whom they have their mortgage. The lender makes it seem like a formality to simply answer the 5 or 6 health questions and say “yes” to the insurance. However, these plans are less likely to pay out, compared to a personal plan. The bank (ie. the bank’s insurer) looks into one’s medical history when a life claim is submitted. In some cases the claim is turned down and the premiums paid are returned to the widow or widower or estate. With a personal life insurance plan, the medical history and deeper questions are asked BEFORE the insurance is approved – this is a major difference!

Another point to mention is that the bank’s coverage decreases with each mortgage payment you make. Let’s say you have a $500,000 mortgage – if death occurs shortly after the approval, then the bank’s insurer will cover the full $500,000 by paying the bank. If death were to occur, say, 20 years after your mortgage begins, with $100,000 owing (for example), then the bank’s insurer would cover the $100,000 remaining on the mortgage by paying the bank. With a personal life insurance plan for $500,000, the full $500,000 would be paid to your beneficiary (not to the bank) if death occurs anytime before the home is paid off. You can also keep your personal plan as long as you wish.