OK – so you’ve bought your dream home! But truth is, you co-own the home with the bank that holds your mortgage. One of the items the bank will request of you is to purchase mortgage insurance – which in theory sounds great. If the unfortunate happens and you pass away, this insurance will pay off your mortgage and your family will own your home. Here’s the catch: It’s a very limited policy for a number of reasons:
- It only covers you for your outstanding mortgage – so your coverage is getting smaller by the day as you pay down the mortgage.
- The insurance lacks some of the beneficial features that come with policies purchased from insurance companies (the ability to convert to permanent insurance, switch to longer terms)
- IT’S MORE EXPENSIVE! Typically 3 times more expensive than with insurance companies as there is very limited underwriting and they charge smokers and non-smokers the same rates.
- The policy is owned by the bank. This means that if you move your mortgage to a new bank the policy terminates. Independent life insurance is owned by you and as such is not impacted by which bank has your mortgage.
If you have or will be taking a mortgage, best to meet and discuss the best options for protecting your investment!
