Buying a home is an important investment and likely to be the biggest asset you’ll own. That’s why it’s key to know your options when it comes to protecting it, and your loved ones. Most people take out a mortgage for up to 25 years to allow them to purchase their home. As a homeowner have you considered how your family would keep up with the mortgage payments should you pass away unexpectedly? Ensuring that your family can continue to live in the home, without having to take on the financial burden of a mortgage starts with the right coverage.
Homeowners have two options when it comes to protecting their mortgage: mortgage life insurance from a lender or bank, and mortgage protection through a term life insurance policy. Both types of coverage are designed to help pay off your mortgage should something happen to you. Understanding the difference can help you make the best choice for you and your family.
We’ve put together a simple comparison grid to explain your protection options.
Mortgage Life Insurance
Term Life Insurance
|Who provides the coverage?
|The bank or lender that finances the purchase of the home.
|Insurance companies like BCAA.
|What happens to the coverage value as I pay off my mortgage?
|The coverage value decreases as your mortgage decreases.
|You choose the coverage amount upfront. The coverage value remains the same, even as your mortgage decreases.
|What can the coverage be used for?
|The balance of your mortgage.
|The balance of your mortgage, plus, income replacement, debt repayments, help to maintain living standards and more.
|Do I need to fill out a medical questionnaire?
|It depends on the bank or lender, but coverage is typically quick to obtain.
|It depends on your age and coverage amount selected.
|What happens when my mortgage is paid off?
|Coverage ends once your mortgage has been paid off.
|You decide on how long you want the coverage to run. The coverage is unaffected by your mortgage ending.
|If I die, who does the payment go to?
|Payment will go directly to the bank or lender and will be applied to the mortgage balance.
|Payment goes to your designated beneficiaries, and they will have the control to make their own financial decisions.
|What happens if I switch financial institutions during my mortgage term?
|The coverage will end, and you will need to take out a new mortgage insurance policy.
|The coverage follows you. It is unaffected by switching financial institutions, so you can take advantage of things like lower mortgage interest rates.
As with any important choice in life, it’s a good idea to take the time to weigh the pros and cons. While mortgage insurance from your bank or lender can be quick to obtain, convenience isn’t necessarily the most important factor when it comes to dealing with the unexpected. BCAA Term Life Insurance provides flexibility and guarantees your family’s financial security beyond mortgage protection, for the unexpected.