Term Life vs. Mortgage Insurance

Term Life vs. Mortgage Insurance

| January 30, 2019
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I often still get questions on whether I should buy Term Life Insurance  or Mortgage Insurance from a Bank or other lending institution. So I created the following comparison  between the two products. I think it will become obvious that Term Life Insurance is much better value for the $$ than Mortgage Insurance. Have a look and you can decide...

Term Life Insurance 

  • You Purchase an individual policy.
  • Your own the policy - you have complete control over it.
  • You have a premium rate that is guaranteed in advance,
    the company cannot decide to change it.
  • You may purchase any amount of coverage that will
    never decrease over the Term of the coverage.
  • The insurance company cannot cancel your insurance if
    premiums are paid, only you can.
  • Your individual policy is fully portable. It is not
    connected to the mortgage and if you re-finance your
    mortgage with another bank, you do not need to
  • You can convert this policy, regardless of your health.
  • You decide who your beneficiary is. Upon death, your
    beneficiary will receive the proceeds and your
    beneficiary decides how and where to use those funds.
    The proceeds of a life policy are protected from all
    creditors, including a bank.
  • If you use level term, and insure both the husband and
    wife individually, then both policies pay benefits in the
    event of both deaths.
  • You are buying the coverage from a licensed broker or
    agent who has been trained to understand your overall
    need for life insurance and how to integrate that with
    your total need.

Bank/Mortgage Insurance 

  • The coverage is under a group policy.
  • The bank owns the policy - you have no control over it.
  • The group policy premiums can be changed if the
    company decides to raise premiums for the group.
  • The coverage is for the outstanding amount of the debt.
    As your mortgage reduces, your insurance decreases.
  • The policy can be cancelled by the bank or by the
    issuing company.
  • The coverage will terminate if you re-finance your
    mortgage, or if you sell your house, or if you pay off your
    mortgage, or if the bank forecloses on your mortgage.
  • The group mortgage policy is not convertible.
  • The bank is your beneficiary and the death benefit is
    automatically used to pay off the mortgage, regardless
    of the wishes or circumstances of your dependents.
  • If you and your spouse are both insured on a bank
    mortgage policy, then only one payment is made in the
    event of both deaths.

As you can see above there are many reasons  why owning traditional life insurance where your family is the beneficiary and not the bank is a superior choice.

If you would like to discuss the benefits of Term Insurance over Mortgage Insurance please give me a call at 902-626-6637  or drop me a note at smcinnis@peake-mcinnis.com .


Susan McInnis

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