Dominic Darmanin

Cell: 604-788-1476 |

Consider Private Insurance instead of Mortgage Insurance:

When buying a home you are inundated with many details and expenses which tend to pile up.

Your financial institution will recommend purchasing mortgage insurance. Great idea but it might be the wrong product for you.


With mortgage insurance (also known as creditor insurance) the premium is added to your mortgage payments and the balance of your mortgage is paid off upon the death of the insured. The premiums don't change even though you're paying down your mortgage monthly and the insurance only covers the remaining balance of your mortgage, that's it! This type of insurance is usually part of a group plan so the terms and conditions may be subject to change by the insurance company. Each time you have to renew your mortgage or if you change financial institutions you have to reapply for mortgage insurance – what a pain. You may also find that mortgage insurance is more expensive than life insurance, especially if you're younger. Most importantly, the policy is paid out to the financial institution who has you the mortgage, you have no choice of beneficiary/ies.


Now with term life insurance the premium and the death benefit (coverage amount) stay the same for the term of the policy which is typically for 10, 20 or 30 year terms. Upon death, the policy is paid out to the designated beneficiary/ies. In this case you can purchase more insurance than the mortgage is worth to give your family more financial stability in your absence. The beneficiary/ies can then decide what they want to do with the money which may or may not include paying off the mortgage.


Typically, getting mortgage insurance is an easier process to getting life insurance. You have to answer some basic health related questions for mortgage insurance and is usually approved very quickly. Conversely, with life insurance a nurse may come out to take blood samples and conduct other tests to gauge your health risk. This involves a lengthier process and qualification for insurance isn't guaranteed.


So if you do have health issues you might be better off to take the mortgage insurance when offered. Think about this carefully before abruptly turning down mortgage insurance reactively.


I won't do premium comparisons here. They are easy enough to do either online, through your financial institution or a life insurance salesperson. If you're young and healthy inquire into the full range of insurance options beyond term life coverage only. There are universal plans as well as other insurance options that may fill your long term estate planning objectives.


Finally, keep an open mind when it comes to your life insurance options. The younger you are the cheaper the insurance premiums are even though they may seem like an additional financial burden when you've just bought a home. Think long term!


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