Term vs. Mortgage Insurance: What You Need to Know
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2 minute read.
As a homeowner, you need to ensure you are protected. You never know when a disaster or tragedy could strike, leaving your family in financially-challenging circumstances.
Mortgage insurance is offered by lenders as a way to protect yourself. If you pass before your balance is paid off, the insurance will provide your loved ones with the coverage they need to keep the home and pay off the mortgage. Mortgage insurance isn’t your only option and may not be the best.
Term insurance should be heavily considered.
Let’s compare each type of mortgage to help you determine which is best for your needs.
Protection
The main difference between term insurance and mortgage insurance is available protection. Mortgage insurance protects the lender, typically a bank. It does not protect you or your estate the same way term insurance does. If you were to pass away, with term insurance, your beneficiaries would receive the entire amount of the insurance policy. They will still need to pay off your mortgage but receive the financial assistance to make that happen. Additionally, term insurance is underwritten at the time of the application rather than at the time of death. This protects your estate as it is more likely to payout.
Benefit Amount
Benefit Amount
Benefit AmountMortgage insurance focuses exclusively on paying off your mortgage. You can only receive enough benefits to pay it off if needed. Term insurance allows you to choose the benefit amount and typically lasts your entire life.
Keep in mind that when you have mortgage insurance, your benefit amount decreases as you pay off your mortgage. When you choose term insurance, the amount does not change.
Cost
Cost
The cost for both types of insurance will vary depending on many factors. For term insurance, you usually require a full medical exam. If you are healthy, you may find that term coverage could be less expensive. If you are looking for ease, mortgage insurance is less of a hassle to receive.
While both mortgage and term insurance have their pros and cons, it is important you take the time to learn about each type. Buying a home is a large investment and you need to ensure that your family is cared for in case tragedy strikes. For more information please contact me and I will direct you to the pros that know best.
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JOSHUA CAMPBELL (@knowledgebrkr)
Real Estate Broker
Coldwell Banker The Real Estate Centre, Brokerage
joshua@knowledgebroker.ca
249 Avenue Road • Newmarket, ON L3Y 1N8
289.231.0001
