Mortgage or Life Insurance?
First we need to understand what type of insurance we’re talking about! Mortgage Default Insurance (aka Mortgage Loan Insurance) or Mortgage Life Insurance. Often times both are referred to as “Mortgage Insurance” but they are very very different and you should know the difference as a consumer. Mortgage Default Insurance or Mortgage Loan Insurance is mandatory when you are putting less than 20% down on a home purchase. See this.
Mortgage Life Insurance is typically offered by your lender when you get your mortgage. Often times it’s referred to as Mortgage Insurance and if you’re in the mindset of thinking it’s mandatory because you’ve got less than 20% down on your home then it’s easy to move on and buy it assuming it’s mandatory. There’s not much incentive for the sales person to explain the difference between the two so I find that many times it’s purchased by accident. Not a bad thing to have but certainly lacking transparency and consent. The payments are usually the same date as your mortgage payment and you never think of it again. Is there a better option? Yes.
Although Mortgage Life Insurance is NOT mandatory in almost every instance, I recommend everyone has some form of coverage in the event of a death especially when there are partners and/or kids relying on that roof over their heads. I’ve created the infographic above to help you understand your options and make an informed decision regarding the type of life insurance you opt for. If you don’t know what or if you have coverage it’s very worth your time to review what you have in place.
Remember!!!! Never replace any existing insurance until the “replacement” is in force and active. Otherwise you could be stuck with no insurance if you don’t qualify for the “replacement” insurance.