The ins and outs of mortgage insurance

Know your options for insuring your mortgage

When you take out a mortgage on a property, you'll likely be offered mortgage insurance, which could include loss of life, disability, critical illness, and job loss coverage. And you’re probably asking yourself one of many questions: should you take it?

Mortgage insurance^*** certainly is convenient since premiums are usually deducted automatically from your bank account along with your mortgage payment. And it can be comprehensive, since depending on the options you select, it can cover you for multiple scenarios.

But before making a decision, look at all your options. You may find that other types of  will not only cover the mortgage debt but will also offer more value and flexibility in meeting your overall insurance needs.

Mortgage life insurance is designed with a very specific purpose in mind: to pay off your mortgage in the event of your death, and depending on the policy, to make payments if you become disabled, critically ill, or lose your job.

However, keep in mind that the financial institution that holds the mortgage is the owner and sole beneficiary of the policy. Even though your coverage gradually shrinks over the years as you pay down the mortgage, your premiums won't change. In addition, the lender can terminate your coverage if you change lenders or move.

A more flexible option

A personal life insurance policy – whether permanent or term – can offer more flexibility. You get to choose the beneficiaries, and they can use the death benefit for whatever need seems most pressing at the time. They might choose to pay off the mortgage, or they might instead use the funds to replace income, pay other debts, or invest. It’s their call.

A personal life insurance policy is also portable, remaining with you if you move or change lenders. Your coverage stays the same as your mortgage decreases.

Should you select personal insurance to cover your mortgage debt, be sure to review your disability and critical illness insurance. At this stage in life, you are far more likely to suffer a disability than loss of life and need this type of protection as well to ensure you can cover your mortgage payments.

It’s not all or nothing

Keep in mind that you can choose to insure only a portion of your mortgage. You don’t have to cover the full amount. You may be in a situation where you have enough other assets or have a partner with an income so that only part of your mortgage needs to be covered through insurance.

Get the right advice for your personal circumstances

Just like everyone else, your situation is unique and will require a customized solution. Getting professional advice can help you protect your family home while also offering your loved ones continuing security over the long term. Talk to a BlueShore insurance advisor about your personal needs.