Mortgage Insurance vs Life Insurance Comparison

Term life insurance is a product that is meant to provide you with peace of mind throughout your life.  

If your circumstances change such as renewing your mortgage with a new provider, buying, or selling your primary residence, you need that coverage to be maintained with you through those processes.  

With a mortgage life insurance policy, even though you pay into it on a regular basis, the coverage doesn’t always go with you through these life events. In many of these cases, in order to re-establish coverage, additional medicals assessments will be required, and if your health has declined over this time, it will be more expensive to re-establish coverage.  

Life insurance on the other hand stays with you, throughout life’s changes. It is important to maintain regular contact with your insurance advisor to ensure your priorities are still covered during those changes and in many cases, there are options that allow a policy to ‘grow-with-you.'  

People aren’t static and their needs change. Life insurance can provide conversion options to give you more flexibility over singular static products like mortgage insurance.  

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The post-claim underwriting process differs between the two

To qualify for a mortgage insurance product, the prospective insured is asked a series of questions. If they answer the questions correctly, they will be approved for coverage on the spot.  

During these questionnaire's you work with your financial institution representative whose primary interest may be to sell mortgage insurance. However, after the insured passes, the financial institution that issued you the insurance investigates your medical history.  

This is one of the most primary differentiators of a mortgage life insurance policy, and often why it is not deemed as the best product to achieve the needs of the average homeowner who is simply looking to ensure their family is properly covered in case of tragedy.  

With mortgage insurance, after the primary insured has passed, the lender investigates the medical history and uses that information to determine if you should have qualified for that coverage in the first place. This evaluation is done despite having gone through the questionnaire at the outset of coverage and paying into the policy throughout the term.

If a discrepancy exists, or if you did not answer a question to the best of your ability, you can be denied a payout leaving your estate with the responsibility of maintaining the mortgage protection insurance. This is something most families would have trouble doing.  

Term life insurance products are superior in this manner as the coverage amounts that you are approved for and the premiums you pay are based upon your financial needs and underwriting that is done right at the onset to reduce the chance of a no payout situation.  

It's also a good idea to make sure you've completed a will to make sure you've covered all your bases.

Life insurance always pays out the full face value

A mortgage protection insurance product pays out your remaining mortgage balance. Your life insurance policy pays out the face value of your coverage, which remains constant.  

As mentioned previously, payouts from a mortgage insurance product payout to the bank, and although mortgage insurance covers the immediate financial needs of your family, it does not take into account the full picture of life for those you leave behind.  

The bottom line

Finding the right policy can be a challenging process and there is a lot of information out there on why one mortgage protection insurance or life insurance product is better than another. Sorting information is a difficult task.

At Dundas Life, we see you as an individual and as such your family, financial and personal goals are what make you unique. Therefore, you should look for a product that fits you. Don’t hesitate to reach out with any questions you may have here.