Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
Mortgage life insurance works very similar to a traditional life insurance policy - in short, a premium is paid to an insurance company and a death benefit is paid by the company to the beneficiary in the event the insured dies during the life of the policy.
There is one key difference between traditional life insurance policies and mortgage life insurance - the structure of the policy death benefit. Traditional policies feature a level death benefit for the life of the policy along with level premiums for a specified term (or guaranteed forever). Mortgage life insurance features level premiums, but have a decreasing death benefit - much like how a mortgage works (hence the name).
In today's marketplace, the rates/premiums for a traditional policy are very competitive with mortgage insurance rates.
In Canada, many lenders offer mortgage life insurance. The death benefit reduces along with the mortgage and is payable to the mortgage company. If you change mortgage companies you have to apply again and you may not qualify. The premiums for this vary and often and individual life insurance policy is very competitive.
If you purchase an individual policy you are afforded more flexibility, not the least of which is the freedom to move your mortgage without loosing your coverage. Most individual policies have a level death benefit, so as the mortgage principle declines an addition amount is payable to your beneficiary.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
When you purchase traditional life insurance to cover your mortgage, you are buying a policy that will pay the same death benefit for the entire length of the policy, regardless of what your mortgage is at that time. Most people leave the death benefit to a personal beneficiary who they can trust to pay off the mortgage, or to a trust that stipulates to use the death benefit in that fashion.
However, one of the nice things about using life insurance for mortgage protection, is that a beneficiary may decide to keep the mortgage and use the death benefit in another way, if that is more favorable to them. This may especially be true at this time of very low mortgage interest rates.
Some people take the step of reducing their policy coverage as their mortgage gets past a certain point of being paid off.
When you are looking at Mortgage Insurance and how it works, in reality it’s just Life Insurance. When you die you are buying a policy to give money to someone for something. Insurance companies use names like “Mortgage Insurance” or “Readjustment Income” to package insurance in a way to make it more marketable. Because you are looking at protection for a given time frame most insurance companies will talk to you about a term policy, 15year Mortgage = 15yrs Term Insurance, 30yr Mortgage = 30yrs Term Insurance. But there are other insurance options available, always talk to an experienced broker that represents multiple carriers so you know all of your options.
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There is one key difference between traditional life insurance policies and mortgage life insurance - the structure of the policy death benefit. Traditional policies feature a level death benefit for the life of the policy along with level premiums for a specified term (or guaranteed forever). Mortgage life insurance features level premiums, but have a decreasing death benefit - much like how a mortgage works (hence the name).
In today's marketplace, the rates/premiums for a traditional policy are very competitive with mortgage insurance rates.
If you purchase an individual policy you are afforded more flexibility, not the least of which is the freedom to move your mortgage without loosing your coverage. Most individual policies have a level death benefit, so as the mortgage principle declines an addition amount is payable to your beneficiary.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
However, one of the nice things about using life insurance for mortgage protection, is that a beneficiary may decide to keep the mortgage and use the death benefit in another way, if that is more favorable to them. This may especially be true at this time of very low mortgage interest rates.
Some people take the step of reducing their policy coverage as their mortgage gets past a certain point of being paid off.