We're getting closer to that light at the end of this INSURANCE tunnel! We are now down to learning about the last two types of INSURANCE that you may encounter when dealing with mortgages: MORTGAGE LIFE INSURANCE AND LIFE INSURANCE.
Both MORTGAGE LIFE INSURANCE AND LIFE INSURANCE insure others if something ever happens to you. Because of the similarity between the names, these two types of insurance are very often confused with one another. Again, DO NOT get these confused with MORTGAGE DEFAULT INSURANCE.
The general idea behind both Mortgage Life Insurance and Life Insurance is that you pay a certain amount of money per month and, if you die, your loved ones will receive a lump sum of money. I am not going to profess to know a lot about these different types of insurance as it is not my area of expertise. It is best to speak with a professional to go over your options to suit your insurance needs. I will, however, explain the general differences.
MORTGAGE LIFE INSURANCE, or MORTGAGE INSURANCE, or MORTGAGE PROTECTION INSURANCE, or MORTGAGE PROTECTION PLAN, is generally offered to home-owners by the bank and protects others for the life of your mortgage. When you sign the mortgage papers to commit to your mortgage, your mortgage broker or bank will include a document offering you the opportunity to buy Mortgage Life Insurance. The premiums (the amount you pay per month) vary depending on the size of your mortgage and your age. If you die and you still owe money to the bank for your mortgage, the policy will pay out the remaining balance of your mortgage. One of the biggest selling points for Mortgage Life Insurance is that your premiums will always remain the same, regardless of how old you are. However, keep in mind that as you make your mortgage payments, your mortgage balance declines but you will still be paying the same premium amount.
LIFE INSURANCE is offered by Insurance Brokers, Insurance Advisors/Professionals, and Financial Planners. You can obtain this type of insurance at any time, though it is recommended that you do it close to when you obtain your mortgage so that the value of your property and debt is secure. Life Insurance can be structured so that, in the event of your death, your loved ones can benefit from more than just having the balance of your mortgage paid off (ie. You can set your coverage to whatever dollar amount you choose). There are many different options for Life Insurance - for example, there are term insurance policies and permanent insurance policies, and each one can be tailored according to your needs. In this respect, Life Insurance offers much more flexibility than Mortgage Life Insurance.
Again, I am by no means an expert on Mortgage Life Insurance or Life Insurance – I just wish to explain the general differences between the two since their names are so similar and thus so confusing. As a general rule of thumb, remember:
Mortgage Life Insurance = offered by the bank and mortgage professionals
Life Insurance = offered by insurance professionals
I believe that it is important for home-owners to have some sort of coverage so that your loved ones will receive benefits in the event of your death. Your home is your biggest asset and it is always best to be prepared.
If you would like to learn more about your insurance options, I highly recommend that you do a bit of research beforehand (there are many different sites that weigh the pros and cons of each). I would like to remain impartial in this blog, as my writing is solely for educational purposes. Speak with a professional in the mortgage industry and/or a professional in the insurance industry to explore your options. However, keep in mind that professionals in the mortgage industry will benefit from selling you Mortgage Life Insurance and professionals from the insurance industry will benefit from selling you Life Insurance.
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