Do I Really Need It?
As homeowners, with a variety of obligations and responsibilities, we know that insurance is an important tool to have in our belt.
One of the worst feelings we can have is worrying about the financial burden that our homes can have on our loved ones in the event that we pass away.
Most people would agree it’s better to be prepared than to be sorry, especially when it comes to our loved ones.
This is where Mortgage Life Insurance and Term Life Insurance come into play.
But which type of insurance should you get and do you really need it?
Mortgage Life Insurance
Though Mortgage Life Insurance is not a requirement in Canada, it is certainly worth considering for homeowners.
When it comes to relieving your beneficiary of the financial stress associated with your mortgage balance, Mortgage Life Insurance is a great option.
Those who invest in Mortgage Life Insurance can have peace of mind in knowing that their heirs will be free of the mortgage payments on their home because the mortgage lender will pay off the remainder.
It’s important to note that the payout from Mortgage Life Insurance is limited in its use, as it can only be used to pay off the mortgage balance, and it depreciates in value over time.
While mortgage payments are undoubtedly a big expense, there are many other additional costs entirely separate from the mortgage balance to keep in mind – for example, regular monthly bills, funeral arrangements, cost of living, etc.
So while Mortgage Life Insurance is a great product for some, it might not be the right type of insurance for others.
Term Life Insurance
For those who would prefer their beneficiary to have more flexibility with how they use the payout, Term Life Insurance is an excellent product to consider.
Term Life Insurance is unique in that it guarantees you the same rate and coverage for your entire fixed term.
The biggest draw for this type of insurance is that it can be used in whatever way makes most sense to the beneficiary.
What’s the Difference?
Term Life Insurance is the superior product for most people because it comes with lower premiums and more freedom.
While Mortgage Life Insurance depreciates in value over time, the opposite is true for Term Life Insurance because the beneficiary actually receives the total amount of your coverage.
This means that the beneficiary, in a Term Life Insurance scenario, would be able to put the money towards paying off the mortgage and/or regular monthly payments and/or funeral arrangements and/or their cost of living, etc.
The beneficiary could even take the entire lump sum, invest it and use the interest derived from that investment to pay off the remainder of the mortgage on a monthly basis.
All this is to say, with Term Life Insurance, the beneficiary is afforded a wide spectrum of financial options to use how they see fit.
It’s important to decide which type of insurance will work best for you and your beneficiary.
Knowing all of your options will help you find the answer – this is where I come in.
One of the biggest benefits working with a mortgage broker is that you get tailored service specific to your financial needs.
If you have any questions regarding life insurance, or anything relating to mortgages, feel free to give me a call and I’ll gladly help wherever I can.