Hint, it’s an easy question.
In this edition of THE FINE PRINT, we magnify the 4-point font at the bottom of every mortgage insurance policy. Our caveat-free advice: if you’re deciding between mortgage insurance and life insurance, the answer is life insurance—ten times out of ten.
Mortgage insurance and life insurance both purport to protect your loved ones in the case of your death. But only one will offer your beneficiaries the freedom to use those payments to truly suit their needs—and at lower rates with fewer restrictions. That’s life.
Mortgage insurance is commonly sold to new homeowners by their banks. At face value, it makes sense: you buy coverage to ensure that if something happens to you, your family won’t be responsible for the remaining balance on your home.
But what they aren’t telling you is that life insurance can be used for the same thing—and more. A life insurance policy can be used towards whatever your beneficiary needs it for, whether it be mortgage payments, tuition fees, outstanding debts, or a hundred other expenses that make up a well-lived life.
With mortgage insurance, your loved ones have no choice about where that money goes. It goes to the bank. As soon as you repay or default on your mortgage, your coverage is lost. What’s more, mortgage insurance premiums are usually higher than life insurance premiums, and they aren’t adjustable the way life insurance premiums are—meaning you’ll pay the same rates regardless of your age or health.
A side-by-side comparison in 125 words or less.
|MORTGAGE INSURANCE||LIFE INSURANCE|
|Who owns the policy?||The bank.||You do.|
|Who decides how much coverage you need?||The bank decides.||You decide.|
|How does your coverage change over time?||As you pay off your mortgage, your coverage shrinks—but your premiums stay the same.||It remains steady.|
|Does your age, health, or smoking status affect your rates?||Mortgage insurance is one-size-fits-all.||Generally, the healthiest clients pay the lowest rates.|
|Who is the beneficiary of your policy?||The bank.||Anyone you choose.|
|What can the benefit be used for?||For one thing only: to pay your mortgage.||For anything: to repay debts, pay for education, invest in your family’s future, and even—yes—to pay your mortgage.|
We can help.
Talk to a Lawyers Financial advisor about how life insurance can keep your family in house and home.
Illustration by Adam Rankin.
Lawyers Financial term life insurance is sponsored by the Canadian Bar Insurance Association (CBIA) and underwritten by The Manufacturers Life Insurance Company (Manulife) P.O. Box 670, Stn Waterloo, Waterloo ON N2J 4B8. Lawyers Financial is a trademark of CBIA.