Mortgage Insurance vs. Life Insurance in Calgary

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Only one third of Calgary homeowners are mortgage free. Since you’ve worked hard to purchase your home, you want to protect it against all the possibilities that life can bring upon us. What would happen to your home if the main income earner suddenly passed away? Are you protected against that loss?

While Life Insurance does not replace a loved one, it does hep to eliminate the financial loss associated with the death of the main income earner.

There is no contention that a home is the most and largest vital financial commitment any family has to make. Ensuring a home is insured in case the main breadwinner passes on should be a top priority. You must protect the home with the right insurance, one that meets your requirements. You can decide to go for term insurance or mortgage insurance, but ultimately, both of them are not the same.

With mortgage insurance, your mortgage’s balance is paid to the bank after the listed individual has died. The lending institution gets paid ensuring the loan has been paid so that those inheriting the home will not carry the burden of that debt. Mortgage insurance is sometimes called creditor insurance and can be bought instantly after signing mortgage papers. The bank is the one offering it and only a couple of health questions need to be answered. The premiums could be added to the agreed mortgage payments. However, while it might sound convenient on paper, many have had to pay a huge price for it.

Paying premiums yet not covered

There is a very crucial fact worth having in mind concerning mortgage insurance; even as you continue paying the monthly premiums, the truth is you are still not covered. Post-claim underwriting is used by these policies where the insuring company delves intensely on the medical history of the covered individual once a claim has been made. What happens is that some people have certain health conditions they have no idea about or clearly knew about, but decided not to indicate them while signing the papers. Once the claim is made, the bank goes back to the medical history, finds the complication and refuses to release the claim. It means that even after funding the premiums, beneficiaries receive zero benefits.

Renewal of policy with mortgage renewal

With term life insurance, the insurance policy covers a person for a certain period, for instance, 10 or 20 years. The amount beneficiaries receive after you have passed on, and the premiums paid do not change as far as the term life insurance is active. On the other hand, lender’s mortgage insurance has to be renewed with every mortgage renewal, in most cases after every five years as most Canadians love. Mortgage insurance is not guaranteed and the premium paid is most likely rising; you are not younger anymore, and you might have developed diabetes, high-blood pressure, cardiovascular complications, etc.

As you pay a higher premium and get less out of mortgage insurance, with term life insurance the family or recipient receives the claim and makes an individual choice on how to use it. Rather than pay off the mortgage, the family can look into some alternatives such as other debts that might be costly and decide to put the money there.

About Clearspective

At Clearspective Financial, we do all the financial planning for you. We offer specialized independent financial services on matters about families and small businesses in Calgary, Alberta. As our client, we can help you make sound financial decisions to accomplish all your financial goals. Our independent experience has given us the ability to transform complex issues into very clear solutions.

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Mortgage Insurance vs. Life Insurance in Calgary