Of Prime Interest: Why to insure a mortgage

The beneficiary of mortgage insurance is the lender where the mortgage is held…

  • Dec. 16, 2015 9:00 a.m.

Do you know the difference between life insurance and mortgage insurance? Mortgage insurance is unique from life insurance in several ways, and you need to consider those differences when making a decision about what form of those two insurance opportunities will work best for you.

The beneficiary of life insurance is whoever you chose—your surviving spouse, your estate, your children or your parents. The value of the policy is paid to your beneficiary and can be used for any purpose including paying off the mortgage.

The beneficiary of mortgage insurance is the lender where the mortgage is held so the funds go directly to the lender and the mortgage is paid off. There are no excess funds to pay bills going forward.

The face amount of a life insurance policy is the amount your beneficiary receives and the premiums are based on the amount of the insurance, your age and your health.

For mortgage insurance, the face amount of the insurance is the mortgage amount owing. What this means is you are paying the same monthly premium for years on a declining mortgage balance.

If you are accelerating your payments or making lump sum payments on your mortgage, the amount is declining even quicker.

Mortgage insurance is typically more expensive than life insurance as it is in most cases offered without a medical check requirement. Rates are based on the average health of the age group being insured. The application process occurs after death and not at the time of the approval.

If the insured had any pre-existing health conditions or just existing conditions at the time of the application, a life insurance claim may be rejected.

Another issue with mortgage insurance is if you decide to move your mortgage from one lender to another, the mortgage insurance is automatically cancelled, causing you to have to requalify with the new lender. You will be older and as we age premiums increase. With life insurance, your policy will remain in effect regardless of what you do with your mortgage.  .

Mortgage insurance is offered at a stressful and emotional time when you are making the biggest purchase of your life. The cost may seem minimal compared to the mortgage payment, but the life insurance option cost can be half of a mortgage insurance rate and provide more financial flexibility.

Just Posted

Kelowna Chamber of Commerce release nominees for 2019 Business Excellence Awards

Nominations were submitted by both the local community and businesses

Central Okanagan to have childcare needs assessed by study

Childcare to be examined in Lake Country, Kelowna, Westbank First Nation, West Kelowna and Peachland

Okanagan table tennis players thrive at 55+ games

Nine Salmon Arm residents were tough to beat at the games in Kelowna last week

Bicycle incident on Daimer Drive in West Kelowna

One man has been taken to hospital

Bulls on parade down Glenmore

A small bull ran into traffic on Glenmore Road in Kelowna earlier this morning

‘It’s almost surreal’: B.C. fire chief, sidekick Sammy recap rescue mission in Bahamas

Chief Larry Watkinson and Sam the disaster dog spent 8 days assisting a search and rescue team

Woman held at gunpoint during carjacking in UBC parkade

University RCMP say the vehicle is still missing, and two suspects are at large

Morning start: Did you know Mary never actually had a little lamb?

Your morning start: Fun fact, weather, and video of the day

VIDEO: Angry B.C. cyclist starts shaming dangerous drivers online

‘You motorists deserve all your costs and misery’

Open fire ban rescinded in Kamloops, Okanagan and coastal regions

Category 2 and 3 open fires will be permitted starting Wednesday at noon

‘Time to take action:’ Children advocates call for national youth suicide strategy

Council wants Ottawa to make reporting of suicides and attempted suicides mandatory for data collection

Swedish rock band Ghost bringing full-scale performance to South Okanagan

The Swedish rock band’s Ultimate Tour Named Death arrives Sept. 21

Canadian inflation decelerates to 1.9% as gas prices weaken

August was the sixth straight month that price growth was 1.9 per cent or higher

Defense says burden of proof not met in double murder case against Victoria father

Closing statements begin in trial for man accused of killing daughters Christmas 2017

Most Read