What is the difference between mortgage insurance and individual life insurance?
Mortgage insurance is owned by the bank. It is put into place by the bank and is there to protect the banks balance sheet rather than your family. Each and every time you move or refinance your mortgage you must re-qualify medically for coverage and if you have had a change in health and now you don’t qualify, you are left without coverage. With individual life you own the policy and it follows you wherever you move… it’s not attached to your mortgage.
With mortgage life if you do pass away, all the money goes directly to the bank not to your beneficiaries or loved ones as is the case with individual life.
With mortgage insurance the bank will get only the amount outstanding on the mortgage itself, whereas with individual life insurance the full amount of the initial insurance policy goes to YOUR beneficiaries… not just the amount left outstanding on the mortgage! Your beneficiaries can choose what to do with the money.
Lastly… individual life insurance is based on your health rather than a general health… therefore… it’s typically cheaper!
Another good piece of information is a documentary done on CBC Marketplace in 2008 called “In Denial.” The documentary shows the viewer how once you sign the paperwork to buy your house you are asked if you want to protect your new investment. If the answer is yes, and we suspect it would be, you are asked to sign here. You skim a solid page of small print and thinking you are healthy you sign on the dotted line. This documentary goes on to show how few people are paid out under these polices and some of the issues that can arise. (Check it out here)
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