Mortgage Protection
Mortgage Insurance vs. Life Insurance: What meets your needs?
Which of your needs are met by each product?
If you’re buying a home or renewing an existing mortgage, you may be offered group insurance by your lender or broker. You put a lot of money towards your home, so it’s worth taking steps now to protect your investment.
Mortgage life insurance is typically marketed towards new homeowners who may be concerned that an unexpected death or illness could leave their loved ones with a large mortgage.
Personal life insurance can perform a similar function for you, but isn’t tied to just covering your mortgage. It’s designed to provide your beneficiaries with money in the event of your death. Its flexibility allows your beneficiaries to use the money for whatever purpose they wish. It’s an individual insurance product.
Mortgage life insurance is different from mortgage loan insurance. If you buy a house with less than a 20% down payment, the lending institution requires you to get mortgage loan insurance to protect against the risk of default. Mortgage life insurance, on the other hand, pays down or pays off the mortgage if the borrower dies.
What is mortgage life insurance?
Mortgage life insurance is coverage that you can purchase as a mortgage borrower. It’s designed to pay off or pay down the mortgage if you die. The insurance money payable under the coverage is always applied to the mortgage balance. This can help your family stay in their home, even if the primary income used to make the mortgage payments is no longer there.
Mortgage life insurance can be convenient to get at the bank when you’re arranging your mortgage. It may be easier to qualify for coverage than with personal life insurance. Mortgage life insurance also features an easy application process. Since mortgage life insurance is group insurance, this can result in lower premiums because the risk is spread out over a large group of people.
A benefit of having mortgage life insurance as part of your overall financial plan is that it can free up money you may get from other insurance policies. For example, the money you get through insurance from employer benefits or a personal life insurance policy could go towards expenses other than the mortgage, such as utility bills or university tuition for children.
Mortgage life insurance usually carries a 30-day “free look” period when all premiums paid can be refunded if you cancel your coverage. This lets you buy coverage right away and have time to review the insurance certificate. It also allows you to talk with an advisor to determine what type of insurance may be best suited for your own financial situation
How is personal life insurance different?
Personal life insurance pays money if you die while covered under the policy. With personal life insurance the homeowner typically owns the policy. Unlike mortgage life insurance benefits, this money can be used however your beneficiary or beneficiaries see fit.
For example, your family or other beneficiaries could use the proceeds to pay for post-secondary tuition, credit card debt, or other living expenses. Personal life insurance can be purchased for a term that is unrelated to the length of your mortgage. Your personal life insurance policy isn’t linked to your mortgage and won’t end because your mortgage is paid off, or you’ve moved it to another financial institution. The amount of your mortgage life insurance is linked to the declining balance of your mortgage and will go down over time, while your personal life insurance coverage typically won’t decrease.
Personal life insurance can work for you today and also be flexible to your changing needs. You may be able to make significant adjustments to a personal life insurance policy without heavy fees. It’s possible your family’s financial situation will change as you have children (or they grow up), and personal life insurance can more easily handle these new financial realities.
Main differences
Mortgage life insurance covers the balance of your mortgage, which decreases as the mortgage is paid down. Personal life insurance coverage, meanwhile, typically stays the same and isn’t linked to your mortgage.
Mortgage life insurance coverage ends when your home is paid off. A personal life insurance policy is unaffected by your mortgage ending, and can keep providing you and your family with protection in the years that follow. Mortgage life insurance provided through a financial institution is typically quick and easy to arrange, and usually only requires answering a few health-related questions. Buying personal life insurance, on the other hand, typically takes longer and involves delving into your medical history
Creditor Protection
An easy way to protect your credit
Creditor insurance is a safety net for you and your family. It can help you pay your debt or keep up with payments if you are diagnosed with a critical illness, become disabled or pass away.
What is creditor insurance?
When you get a house, loan, line of credit or a credit card, you want to know you won’t lose them should anything happen to you. You also want to make sure your loved ones aren’t stuck with debts they are unable to handle.
This is where creditor insurance comes in. Sometimes known as creditor protection, it can pay your mortgage or loan balance or help make debt repayments on your behalf, in case the unexpected happens.
The unexpected can be a critical illness such as life-threatening cancer, heart attack, stroke, your death or an involuntary job loss.
How does it work?
Creditor insurance can make a lump-sum payment towards your loan or make regular payments directly to your lender. The maximum amount and number of payments, and other terms of coverage, may differ depending on the lender and loan product. They will be specified in your certificate of insurance provided on enrollment.
What can you insure?
· Your mortgage
· Your loan and line of credit (personal or business)
· Your outstanding credit card balance
How do you get it?
You can apply for creditor insurance directly from most banks and other lenders when you arrange your loan. The cost of insurance or the premium will depend on the coverage you enroll for. You will need to fill in a separate application for insurance and may need to answer a few health questions. However, in many cases you may even automatically qualify for coverage. If you decide to cancel your insurance later, you’re free to do so at any time.