Mortgage Protection Insurance
Mortgage protection life insurance, also called "mortgage protection insurance" or "mortgage life insurance", and sometimes even called "mortgage insurance" is type of mortgage insurance usually offered by banks, lenders affiliated with banks, and some other financial institutions. Policy terms and conditions may vary by province and by financial institution, but in general is not good protection for you or your family and you should not buy it.
These kinds of policies are equal to the mortgage amount you are taking and only cover your outstanding debt, meaning the payout gets smaller and smaller as you pay off your mortgage, which means your mortgage protection insurance policy shrinks. On the other hand, your insurance premiums stay the same through the insurance term, which means your payments stay the same.
WHY SAY NO TO MORTGAGE PROTECTION INSURANCE
The policy payout under a mortgage protection life insurance is payable to the bank or some other financial institution to discharge the mortgage, not to your chosen beneficiary. In other words, it works great for the bank or financial institution selling it – but may not be the best plan for you and your family.
Mortgage life insurance is not portable, which means it is tied to your mortgage. If you decide to change your mortgage lender at renewal, or buy another home, you will need to re-apply for your insurance coverage and likely pay a higher premium.
Mortgage protection insurance is "typically underwritten after the fact" which means that the insurance company will only take a close look at insurance policy once claim is made. If they find that something in your particular situation violates their contract, they may decide you never did qualify for the coverage and they will pay nothing, which would leave your lowed ones without any coverage just when they need it most.
NOTE: We suggest to take a closer look at personal life insurance instead because it is much better option and covers better than mortgage protection insurance. Take a closer look at your insurance needs and find a good insurance agent for more details and practical advice on what works best for your situation.
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