We recommend that you protect the investment you’re making in your home with personally owned life insurance, rather than mortgage insurance from a bank.

Purchasing a new home can be both exciting and stressful. For many people, a mortgage is the largest investment they will make in their lifetime. But would your loved ones be able to cover the mortgage payments if something unfortunate were to happen to you?

Don’t let worries like this add to the stress of purchasing a home. Life insurance offers an affordable solution to mortgage protection can be tailored to meet your unique needs.

What is term life insurance?

Term life insurance is considered to be the most affordable life insurance option for many people. It provides a fixed death benefit for a fixed premium payment, over a fixed period of time. Your premium payments are guaranteed, and will remain level for the term you select.

But my bank is offering me mortgage insurance

Your bank, or other mortgage lender, will likely recommend their mortgage insurance. However, regular mortgage insurance offers you little control with respect to what happens to your coverage. The lender is the beneficiary and decides how proceeds are spent, while your coverage declines as you repay your mortgage.

With life insurance, you’re always in control. You own the policy, decide who the beneficiaries are, and your coverage amount remains level even though your mortgage balance decreases. And if you decide to move your mortgage to another financial institution, your life insurance goes with you. You don’t have to reapply for coverage and your rates won’t increase.

More than just mortgage protection

What’s more: because term life insurance can be used for a range of time-sensitive expenses and not just mortgage protection, you’ll have the option to renew your policy once the mortgage is repaid, or convert to a permanent life insurance plan. Premiums and the death benefit are guaranteed, plus there is a wide selection of terms, issue ages and valuable built-in features.

And it’s cheaper too?

Yes! At the risk of sounding like a late-night infomercial (wait: there’s more!), life insurance is often less expensive than mortgage insurance. Why? All the underwriting is done up front. Assuming you are healthy, and ideally a non-smoker, the rates are often substantially less than mortgage insurance.

But we bought insurance years ago

Great. But has anyone looked at it lately? As the population lived longer we aren’t dying as early; this is what life insurance companies call “mortality.” With mortality decreasing, many life insurance companies cut their prices for term life insurance.

I probably wouldn’t get it anyway

Well, you may be right. However, you don’t know until you try. We recently were able to get $500,000 of life insurance for someone who had a serious, life-threatening heart issue, and he paid less than $50 a month. That was ironic, because he was told his whole life he wouldn’t qualify for insurance.

 

This article is part of a monthly series of investment and insurance advice featured in Hespeler Village Magazine. The write of these articles, David Reeve, is President of Davlyn Financial a local, award-winning financial planning firm in Cambridge.

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