What Insurance Makes More Sense? Mortgage or Life?

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Many times people that are in the process of buying a home end up considering a mortgage insurance policy to protect them in case of a sudden change of circumstances leading to the inability to pay on their home. Did you know that even through closing, the mortgage is your obligation and regardless of unforeseen circumstances the note must be paid? That is why one of the things many buyers do is to secure insurance on the mortgage in the interim.

However, there is a viable alternative in the form of life or term insurance. While both seem to be yielding the same result there are some very noteworthy differences that will change how you decide to use each. Here is a look at some of those differences:

In Case of Mortgage Holder’s Death

The most important aspect of a mortgage insurance premium is that your mortgage is secured. The bank will automatically be paid in case of one or more mortgage holder’s death. With a life insurance or term policy however, the beneficiary will receive a tax-free payment in cash and is free to decide how to disburse the funds.

Policy Ownership and Control

This is a matter of controlling the policy not only from an ownership standpoint but also in terms of rate plans and effective dates. With mortgage insurance the underwriter has the right to change rates or even cancel the policy at any time. Life and term policies allow the policyholder much more autonomy.

Financial Considerations

Once again, life or term policies allow more flexibility in that the premiums are established at the start, are usually low in cost and can be adjusted to your needs. Mortgage insurance policies, while start out lower in cost, tend to add up and end up being the most expensive option.

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Though nothing surpasses the professional advice and counsel you will receive from a certified accountant or financial planner, we believe that a life or term policy is a better choice. Of course depending on timing, you may want to temporarily institute a mortgage policy while waiting for the life insurance or term policy approval so that you are protected in the interim.

As always, please feel free to call or visit us at any time for more information on this or anything else you may need. We look forward to serving your needs! 

If you have any questions about mortgage insurance or life insurance, please click on the link below and we will have a specialist contact you.
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