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Mortgage Insurance Vs. Personal Life Insurance

Without question, your home is one of the most valuable and important assets in your life. You put a lot of money into your home and would like to have the peace of mind of knowing that your loved ones and your mortgage will be taken care of in the case that something unexpected happens to you. 

There are a few options for homeowners when it comes to their mortgage protection: mortgage insurance and personal life insurance. Let us now look more closely at the differences between mortgage insurance and personal life insurance so that you can find out which insurance is best suited for you as a homeowner. 

How Does Mortgage Insurance and Personal Life Insurance Protect You?

The general purpose of insurance is to provide you and your loved ones financial security in the case of an emergency (i.e. sudden death, loss of employment due to injury). A personal life insurance policy is a tax-free lump sum payment to your family after your passing. This payout usually goes directly to the beneficiaries listed on the policy and not to the bank or mortgage lender. Your loved one’s can use this payout for the following:

  • Paying off your remaining debts.

  • Funeral costs.

  • Child care costs. 

  • Post-secondary tuition fees.

  • Covering other life expenses (i.e. food costs, car insurance, utility bills).

A mortgage life insurance policy is somewhat different from personal life insurance in that it is only applicable to your outstanding mortgage balance. 

This means that your family does not receive a tax-free lump sum payment upon your passing, but rather the money goes directly to your bank or mortgage lender. This insurance coverage is a good option in assuring that your family can stay in your home, even after the primary income for paying off the mortgage is no longer there. 

Which Is Right For You As A Homeowner?

Every homeowner has a different financial situation from another with regards to their mortgage and this applies to their insurance coverage options. Mortgage insurance is provided by your bank through group insurance and this can result in you paying lower premiums. Mortgage insurance is also easier to apply for as opposed to personal life insurance which usually requires a comprehensive medical application process. Another benefit of mortgage insurance is that it can allow your family to use the money from any other insurance policies in your name. So if you have bought into personal life insurance, you can have the peace of mind that your family can use these funds for their living expenses and not for paying off the mortgage. 

Personal life insurance is a prudent financial plan for your loved one’s after your passing. The main difference between this insurance option and mortgage insurance is that your family can use the payout however they see fit. They can pay off any of your remaining debts, post-secondary education fees, or other living expenses. Also, the big difference is that unlike  mortgage insurance, your life insurance coverage does not expire after your mortgage is paid off. In essence, a personal  life insurance option provides for you and your family in the years that follow after your mortgage has been paid off. 

If you are interested in finding out more about personal life insurance or mortgage insurance please contact us today to find out how we can help you in meeting your insurance coverage needs.