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Why should I choose personal life insurance over the mortgage insurance I can buy at the bank or lender? And what is the difference anyway?
    By Teresa Perrotta of HarbourLight Financial Solutions

The average person is aware of the insurance that can be purchased at the bank or lender when they are securing their mortgage; this is commonly known as Mortgage Insurance or Decreasing Life Insurance. The other type of insurance is personal insurance and although there are many types, in this case, Term Life Insurance can serve the same purpose but with many more advantages.

There are some key aspects to Mortgage Insurance that a buyer needs to be aware of. First of all, the insurance is owned by the bank or lender therefore; they are automatically the beneficiary of the insurance. Mortgage Insurance or Decreasing Life Insurance only pays out the amount left owing on the mortgage, even though the premiums you pay while you have the mortgage are based on the initial principal amount. Hence, premiums tend to be significantly more expensive and they also more costly because you are lumped into a group rate not taking into consideration your level of health.

The most critical aspect of this type of insurance is that the bank or lender could cancel your insurance at anytime! Even worse than that is the fact that Mortgage Insurance is underwritten at time of death. What does that mean? The insurance company will determine after the claim has been submitted if you were insurable or not; basically if you were healthy enough or not. You could be determined to be uninsurable and the claim could be denied…the bank or lender will not have to pay out your mortgage balance!

What’s the alternative? Personally owned insurance like Term Life Insurance is a product that you own and control. You determine who you would like to be the beneficiary to receive the death benefit and they can decide what the death benefit will be used for; paying off the mortgage, income replacement, kid’s education and so on. The premiums tend to be considerable less than Mortgage Insurance due to the fact you are rated based on your personal level of health rather than a group rating. This is why underwriting is done at the time of the application to determine your level of health and to be certain that you are indeed insurable. Really what it all boils down to is: Who do you want to be in control?

For more information about insurance products or other financial planning tools, contact Teresa Perrotta, HarbourLight Financial Solutions Ltd. at 403.516.6002 or teresaharbourlight@gmail.com