When you get a mortgage to buy a home, your lender will offer you mortgage insurance. Although there is nothing wrong with getting mortgage insurance, we suggest getting an individual life insurance policy because it comes with more benefits, flexibility, control and longevity.
Let’s explore some of the key differences.
First, individual life insurance premiums are often cheaper than mortgage life insurance premiums. Individual life insurance premiums are also guaranteed, which means they will not increase depending on your mortgage life insurance group’s claim rate.
Second, a mortgage insurance policy is owned by the lender who can therefore make changes at any time. Your lender will also generally name themselves as the sole beneficiary. With an individual life insurance policy, you own your policy, and only you can make changes to it, including naming your beneficiaries.
Third, your mortgage life insurance death benefit amount generally decreases over time as you pay your mortgage off, and ceases to exist once your mortgage balance reaches $0. Your individual life insurance coverage amount will remain level regardless of your mortgage loan's balance.
Finally, coverage offered by individual life insurance is attached to the policy owner (you), so if you end up moving in the future, it will move with you. If you have mortgage insurance and you end up moving to a new property, your policy is attached to the property you originally bought it for and you will have to re-qualify to get your new home insured. It may be difficult to get insured at a reasonable rate when you are older, so it is best if your insurance policy can move with you.
The choice is clear: if you are insuring your home, opt for individual life insurance.
If you need assistance in finding the right policy for you, please contact us.