Ditch Rented Mortgage Insurance in Favour of Life Insurance You Own
Do you have mortgage insurance? This is the kind of insurance intended to cover your mortgage so if you die early your family isn’t left with payments they can’t afford or worse, having to sell the family home to make ends meet.
Why you should own your own Policy?
Bank issued mortgage insurance (also called Creditor Insurance) pays out the debt. The Bank is looked after but your family is not and may still have to sell the house to make ends meet. Also at time of death, the Bank will then review your application for mortgage insurance and may or may not actually approve the payout. Regardless, this process typically takes several months during which time mortgage payments are still expected to be made.
If you pass away unexpectedly your family is going to have all kinds of unexpected expenses and calls for cash over and above the mortgage. Having the control and certainty of owning your policy independent from your bank solves this. If you purchase life insurance from a traditional life insurance company like Manulife your beneficiary(ies) will get a lump sum of money on your death. This can be put into an account and used to pay the mortgage as needed. It also allows your family to finance household and lifestyle expenses as they get life back on track. A fully paid mortgage doesn’t do them any good if they can’t pay monthly bills.
At Red Seal Financial Ltd., as part of a comprehensive financial plan, we will commonly apply for your own medically underwritten life insurance from a major insurance underwriter like Manulife. Once you have gone through the medical underwriting process and your new life insurance is issued, you can cancel your bank mortgage insurance and save those monthly premiums.
We always recommend leaving bank insurance in place in case until your new policy is issued so there are no gaps in coverage. The process of traditional medical underwriting can take several weeks before coverage is in place.