Ask MoneySense: Mortgage life insurance

For insurance to be useful, you need to insure something you rely on, such as your income or your home.

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From the Summer 2012 issue of the magazine.

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I’m thinking about buying a house and I want to know if I need mortgage life insurance.

—Ed Remingo, Kitchener, Ont.

The short answer is no. For insurance to be useful, you need to insure something you rely on, such as your income or your home. “Mortgage life insurance insures the wrong thing,” explains Glenn Cooke, an independent broker who runs LifeInsuranceCanada.com. “You should be insuring your income, which is paying your mortgage.”

Another problem with mortgage insurance is your premiums remain the same over time, but the potential payout drops as your mortgage is paid off. A cheaper option is term life insurance, where both your premiums and your coverage remain level. Term insurance has other advantages, too. “Mortgage insurance pays the creditor, term insurance pays your beneficiaries,” Cooke says. “It gives your beneficiaries more choice.”

Got a question for MoneySense? Email it to ask@moneysense.ca.

3 comments on “Ask MoneySense: Mortgage life insurance

  1. Thank you for posting this! So many people are wasting their hard earned money on mortgage insurance that basically just makes sure the bank gets its money back. They make you pay a insurance that provides them with benefit! Plus it is hard to ever get them to pay out as the underwriting process begins after the death/ So they will look up all your health concerns you had so they don't have to pay.
    Put the money in a term or whole life insurance and the ball is in your court!

    Reply

  2. Here is more reasons to own your own policy rather than the Bank

    Lets say you move from BMO to Royal Bank with your mortgage (you just cancelled your bank bought policy!)
    Lets say you sell your House (you just cancelled your bank bought policy)
    Lets say you paid off your mortgage (you just cancelled your bank bought policy!)

    Reply

  3. Plus, most of these policies offer the policy without ensuring that you are insurable. This causes additional issues even getting the money if it was actually needed.

    Reply

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