Mortgage insurance sounds like something that anyone would be interested in having. To insure one of the largest financial commitments that you will probably ever make must be a good idea after all, right?
Did you know that there might be better ways to ensure that your family's living arrangements are taken care of, in the event that you pass away? One danger with mortgage insurance is that, knowing that the mortgage on the family home will be paid, you might underestimate the amount of insurance that you need for the rest of their living expenses, or things like post-secondary education. In practice, a better strategy is to buy enough term or whole life insurance to cover all the costs that you want to cover. The mortgage may not even be the most relevant expense that your family will have: although it is not pleasant to think about, they may even opt to sell the house. Whether they would or not, ask yourself who actually benefits from the mortgage being paid off? The bank that holds your mortgage benefits, and you are protecting their financial interest. Might any mortgage premium amount you pay each month be better put toward more term or whole life coverage, meant specifically for your family? Greater flexibility, for the same money, would be what you are choosing.
If you decide to approach your family's expenses with this holistic approach, what policy might be best, out of the many available? Obviously each situation is different, and you really must consult with more than one unbiased source of information (i.e. someone not actively engaged in selling you insurance!) but one policy to consider is a return of premium term life policy. The policy can be purchased for a term similar to that of your mortgage, say 15-30 years. If you are still alive when your policy ends, you get all your premiums back, tax-free. Statistics say that it is likely that this will happen, by the way.
Now, if you do still determine that mortgage insurance is what you want, there are a couple of reasons why you should NOT buy it from the bank from which you take out your mortgage. First, you will probably be offered mortgage insurance with a constant monthly premium to cover an mortgage principal amount that is declining over time. That is definitely a bad idea in the later years of your coverage.
Secondly, in the event that you take out a new mortgage or renew your present mortgage with a different bank, you will have to reapply for mortgage insurance, and since you will be older, the new terms may be much less favorable. A 'portable' term policy covers you continuously in either event, and this portability is a great feature.
All in all, think twice about accepting the 'convenience' aspect of the mortgage insurance that your lender will very probably offer you. It is probably not the best type of insurance to pay premiums into each month, and even if you decide that it is right for you, your mortgage lender is almost certainly not the financial institution from which to buy it.
Did you know that there might be better ways to ensure that your family's living arrangements are taken care of, in the event that you pass away? One danger with mortgage insurance is that, knowing that the mortgage on the family home will be paid, you might underestimate the amount of insurance that you need for the rest of their living expenses, or things like post-secondary education. In practice, a better strategy is to buy enough term or whole life insurance to cover all the costs that you want to cover. The mortgage may not even be the most relevant expense that your family will have: although it is not pleasant to think about, they may even opt to sell the house. Whether they would or not, ask yourself who actually benefits from the mortgage being paid off? The bank that holds your mortgage benefits, and you are protecting their financial interest. Might any mortgage premium amount you pay each month be better put toward more term or whole life coverage, meant specifically for your family? Greater flexibility, for the same money, would be what you are choosing.
If you decide to approach your family's expenses with this holistic approach, what policy might be best, out of the many available? Obviously each situation is different, and you really must consult with more than one unbiased source of information (i.e. someone not actively engaged in selling you insurance!) but one policy to consider is a return of premium term life policy. The policy can be purchased for a term similar to that of your mortgage, say 15-30 years. If you are still alive when your policy ends, you get all your premiums back, tax-free. Statistics say that it is likely that this will happen, by the way.
Now, if you do still determine that mortgage insurance is what you want, there are a couple of reasons why you should NOT buy it from the bank from which you take out your mortgage. First, you will probably be offered mortgage insurance with a constant monthly premium to cover an mortgage principal amount that is declining over time. That is definitely a bad idea in the later years of your coverage.
Secondly, in the event that you take out a new mortgage or renew your present mortgage with a different bank, you will have to reapply for mortgage insurance, and since you will be older, the new terms may be much less favorable. A 'portable' term policy covers you continuously in either event, and this portability is a great feature.
All in all, think twice about accepting the 'convenience' aspect of the mortgage insurance that your lender will very probably offer you. It is probably not the best type of insurance to pay premiums into each month, and even if you decide that it is right for you, your mortgage lender is almost certainly not the financial institution from which to buy it.
