Mortgage Life Insurance & Personal Life Insurance
Life Insurance - Who Needs It?
Death isn't something that we normally like to think about, but when it comes to protecting your family from a mountain of debt, it's a subject that should definitely be discussed. If you were to pass away, would your spouse be prepared – and financially capable – to shoulder a mortgage all on his or her own? Life insurance, whether it be mortgage life insurance or term insurance, can remove the “what if?”, and provide you peace of mind if something were to ever happen to you.
Essentially, there are two major types of life insurance related to your mortgage: mortgage life insurance, and personal life insurance. Each has their pros and cons, and that's what we'll discuss here.
Mortgage Life Insurance
The first kind of life insurance is Mortgage Life Insurance. This is generally provided to you through your mortgage lender, although there are independent mortgage life insurance companies, such as Broker Plus. Like any other insurance policy, you pay a monthly premium that is based on your age and state of health, but it differs in that the premium also takes into account the amount of your mortgage. The being said, mortgage life insurance applications don't always ask detailed questions about your state of health. Mortgage life insurance is a group policy, so many clients will be under one specific policy, which gives a less personalized insurance product and/or premium.
Mortgage life insurance functions as a declining balance – as you pay down your mortgage, your insurance payout decreases (since the payout to the bank equals the outstanding balance of your mortgage at the time of death) – and your premium stays the same throughout the amortization period of your mortgage. Also, even if you have a mortgage insurance policy for both you and your spouse, it only pays out for the first person who passes away.
Mortgage life insurance is a good product for smokers (who are considered riskier clients by regular life insurance providers) because creditors don't generally ask whether someone is a smoker or not. They also don't ask for in-depth information about your medical history, so someone with a pre-existing health problem could still qualify for mortgage life insurance. The only catch is that the person with the pre-existing health condition would have to survive past the first twelve months of the policy (so one year after the policy comes into effect). Otherwise, the insurer could deny any payout.
Term Life Insurance
The second kind of life insurance is regular life (or term) insurance. You can obtain this through your financial planner or an insurance broker. The monthly insurance premium you pay is based on your age and health, as well as how “risky” your lifestyle is (someone who sky-dives on a regular basis would be considered riskier than someone who enjoys lawn bowling). Because life insurance providers specialize in, well, insurance, they ask more detailed questions about your medical history to provide you with a more custom-tailored product and premium price.
The payout of term life insurance doesn't decrease as the outstanding balance of your mortgage does, it stays the same for the duration of the policy. If both you and your spouse were to pass away – and you each had your own life insurance policies – your beneficiaries would receive double the payout. And speaking of beneficiaries, unlike mortgage life insurance, it doesn't have to be your mortgage lender that receives the payout – it can be your spouse, children, parents, etc. - so you don't necessarily have to pay off your mortgage with the payout.
Life insurance is a good product for low-risk, healthy, non-smoking clients that qualify for lower premiums than what mortgage life insurance would offer, and want the flexibility of being on their own individual policy and choosing their own beneficiary. Another good point of life insurance is that if you move or pay off your mortgage, the insurance coverage doesn't end (like it would with mortgage life insurance).
Overall, you should think about the “what ifs?” and your specific situation and choose the life insurance product that suits you the best. If you’re interested in obtaining a quote for either type of insurance, please Contact a mortgage broker and we can acquire a quote for you or refer you to a life insurance professional who can advise you of your options.
For more information, or to obtain a quote:
Please contact Lisa Keddy at 780–702-7528 or complete the following form and Ms. Keddy will call or email you back within one business day.
Thank you for your interest in Life Insurance
Mortgage Rates
| Term | Mortgage Rates |
| 1 Year | 2.60% |
| 2 Year | 3.09% |
| 3 Year | 3.49% |
| 4 Year | 3.89% |
| 5 Year | 3.89% |
| 7 Year | 4.99% |
| 10 Year | 5.35% |
| ARM / Variable | 2.05% |
| Line of Credit | 3.25% |
Last updated July 27, 2010
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