Mortgage Life Insurance and Personal Life Insurance: A Comparison Chart

Is mortgage insurance a good deal?

Not if you compare it item by item against personal life insurance.

Bank mortgage insurance may be the worst financial decision you will make in your entire life.

Read our comparative table line by line to realize just how the banks stack the odds against you.

Bank Mortgage Insurance

Personal Life Insurance to Cover the Value of Your Mortgage

Both policies worth the same aren't they? They have the same initial dollar value.

NO

This is deceptive. The initial dollar value is the same but as you pay your mortgage back over time, your policy coverage drops. But you still keep paying the same premium! You pay more for less coverage.

YES

Over the long and even the medium run, straight life insurance is worth far more as the coverage never decreases. Not only that but you can get a fixed 20 year term policy so that your premiums never go up. Life insurance has the same payout in 15 years as today, even if you pay your mortgage out early.

Does the policy belong to me and my family?

NO

Your coverage goes through your bank. The bank is your beneficiary and your insurer at the same time. In most cases, the bank can cancel your coverage when they see fit.

YES

It's your coverage and the insurance company has a contractual obligation to maintain. Any changes to your life insurance policy can only be made with your agreement.

Can I choose the Beneficiary of the Policy?

NO

The bank is your beneficiary. Full stop.

YES

With life insurance, you name your beneficiary yourself. Your survivor can do whatever he or she likes with the insurance money if paying off your mortgage is not an immediate priority and there are better investments available.

If both my spouse and I die at the same time in an accident or other mishap will we receive a double death benefit?

NO

Definitely not. One mortgage, single payment but only a single benefit and a declining one at that (your benefit).

YES

In the case of personal life insurance, the insurer pays a death benefit for each life insured. If you are each covered for $500,000, the insurance company will pay out one million dollars to your beneficiaries. Which is a lot more than your declining shared mortgage balance.

What happens if I change my mortgage? Will the insurance follow me?

NO

Every time you move or change your mortgage, you lose your old mortgage insurance and have to reapply. Given how often people move in our times, this is a significant inconvenience and you risk higher costs – and you may not be able to get new coverage at all if your health situation has changed.

YES

You can move as often as you like and your original life insurance remains valid. You can switch banks if you like. Just pay your premiums regularly and your original insurance will stay with you no matter any changes in your health (there are some limitations in the first two years of many life insurance policies).

Are claims handled the same way for bank mortgage insurance and real life insurance?

NO

What the banks do here is so evil that it's been outlawed in Quebec. Unfortunately not in English Canada. The banks do not qualify or underwrite your insurance at the time you begin paying premiums. They only validate your coverage at the time of death. Often they find loopholes and renege on the contract, refunding only premiums. Your beneficiaries often lose the insured home. It's ruthless, it's heartless and it should be illegal but it's not.

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YES

In the case of a life insurance company, the policy is fully valid at signature. If health checks are necessary, they are run before you start paying premiums not after. After the first two years of coverage, the insurance company can not contest your beneficiaries' claim on health grounds.

Do I get a better rate if I’m in great shape? A good health bonus...

NO

Forget it.

YES

Absolutely, life insurance preferred rates are often substantially better.

Can I convert my plan to permanent insurance?

NO

YES

Most term life insurance policies allow and encourage you to change your insurance to permanent life insurance.

Are my insurance payments non-taxable?

NO

Mortgage insurance is liable for for PST.

YES

Personal life insurance is exempt from PST.

What happens after the mortgage is paid? Will I still have coverage?

NO

There is no coverage after your mortgage is paid. The worst part is that for second half of your mortgage you have very little coverage (your mortgage is partly paid off) and you are still paying full premiums.

YES

Right to the end of your insurance contract, you have full coverage, even if your entire mortgage is paid off. After your mortgage is paid, you can continue the coverage or convert it into a different kind of life insurance.

Can I custom tailor a plan to my situation?

NO

The coverage is the coverage. End of story.

YES

A good broker will be able to help you negotiate any additional elements to your insurance which suit your situation, including disability, long term illness or accidental death.

Get yourself a free Term Life Insurance Quote and see for yourself the difference indepenent coverage can make. Save yourself money and stress and keep your independence.

4 Comments

  1. S N 10/30/2011 at 3:49 pm

    I have mortgage insurance and now i want to buy life insurance. can i buy life insurance and use it against my mortgage insurance. I mean keeping one insurance which will pay off my mortgage on my death.pls advice

  2. LSM Insurance 10/30/2011 at 6:17 pm

    Thanks for the note. Yes you can keep your mortgage insurance with your lending istitution and your life insurance. We will send you a separate email now.

  1. pal 11/22/2013 at 8:59 pm

    Are my insurance payments non-taxable?

    NO

    Mortgage insurance is liable for for PST.

    YES

    Personal life insurance is exempt from PST

    what is PST ?

  2. LSM Insurance 11/23/2013 at 11:41 am

    Hi Pal. Life Insurance insurance death benefits are generally tax free. PST refers to provincial sales tax.

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