Your mortgage is likely the largest debt you will ever take on in your life. If something were to happen to you, would you like to see it paid off so that your surviving spouse or partner or your children can have the benefit of a mortgage-free home? Mortgage insurance is a good idea, but you need to make sure that you buy the right type of coverage to protect your loved ones if the worst should happen.
Take a Close Look at your Options for Mortgage Insurance
- Buy Coverage from your Lender
Many banks now offer mortgage protection insurance to their customers. This type of coverage is easy to apply for, since there is no medical exam required in many cases. It pays off the mortgage if the policyholder dies during while the policy is in force.
Homeowners may not realize that they are paying a level premium for coverage that continually decreases in value. As you make your mortgage payments, the amount you owe to your lender shrinks. With this type of policy, the insurance company only pays out the face value of the mortgage. You don’t get charged less for premiums as you pay down your mortgage.
- Purchase a Term Life Policy from an Insurance Company
You also have the option of buying a term life insurance policy in amount that will cover what you owe on your mortgage plus whatever amount you feel you need for other expenses. If you die while the policy is in force, the money is paid to your beneficiary, not the lender. Your beneficiary can pay off the mortgage and use the balance to pay for funeral expenses, outstanding debts, your children’s post-secondary education, to help fund his or her retirement or any other purpose.
This option provides more flexibility and you get a level amount of coverage for the premium you are paying. If you choose a policy for $250,000 or $350,000 or whatever amount, that is the benefit your beneficiary will receive from the insurer. The amount will not decrease because you have paid down a certain amount on your mortgage over time.
It makes sense to shop around for the best insurance rates just like you would for the best mortgage rates. Call Mark Price, insurance broker, to get the best deal on a residential or commercial mortgage.