Mortgage Insurance

How Mortgage Insurance works

Typically Mortgage insurance purchased through most lenders works the following:

1. You do not own the policy the Lender does.

2. The Lender is the beneficiary.

3. You cannot alter, renew or convert the policy.

4. If you choose to move your mortgage to another lender, you can’t transfer the policy.

5. The amount of coverage is the amount of the mortgage owing to the bank

There are much better alternatives to creditor insurance plans. For instance, if your mortgage is for a set period of term we recommend taking out a personal policy with a traditional life insurer. This will provide you with several advantages:

  1. Your death benefit is paid tax free to your family, NOT the bank. This is super important. For instance, if a death occurs the benefit would be paid in full, tax free to your named beneficiary. It would be up to them to allocate the funds from this payment to cover the cost of the mortgage outstanding. If there is anything left, they keep it.
  2. Your benefit and premiums stay level. Unlike mortgage insurance, your benefits and premiums stay the same with a term policy. This means your dollars buy the same coverage for the life of the term!
  3. Term insurance plans have added features. Want to add a rider to your policy? Convert it to a permanent plan? Reduce the benefit? Change your beneficiary? All of this is possible with your own policy. With Mortgage insurance you’re stuck with the bank’s agreement.

There are many different plans available in the market place- learn more and ask an expert before you apply!

Want to learn more about affordable term life insurance?