Committed to providing solutions for your future needs.

VirtualSage™ - Start Your Plan

(877) 422-6346 x 738

Show all articles


Personal Wealth and Finance

The smart alternative to mortgage life insurance

November 1, 2023

Your mortgage lending institution sells creditor insurance to ensure that, upon the decease of the homeowner, they remain free of home-related debt. However, homeowners can use their personally owned life insurance policies for mortgage protection. An alternate way of insuring your mortgage is to take more control and carry an additional amount of your own privately owned life insurance to pay off your mortgage debt if you or your spouse or both die.

When you own your policy allows you to:

1. Increase the coverage on an existing life insurance plan. You may already own life insurance, or you can purchase a new personal life insurance policy. You can usually add a term rider to cover the mortgage. The bottom line is that you, not a financial institution, own and control the policy. Your assigned beneficiary collects the proceeds, and the person with executor powers, such as your spouse, governs the payout or continuance of the mortgage.

Note: You may legally need to assign a portion of your life insurance if you opt out of the bank’s plan.

2. Designate and change a beneficiary. The beneficiary. (recipient of the life insurance proceeds) could decide  how to use the insurance proceeds. Would it be wise to pay off the entire mortgage, refinance, or keep a very low-interest mortgage? These options remain if you own your life insurance policy. With mortgage insurance, there is only one possible beneficiary — the mortgagee, the lending institution.

The lending institution is first in line to receive the benefits of a mortgage insurance policy. Because it is designed only to pay off the mortgage, no excess benefit is allocated to anyone else, such as a spouse.

3. Take total control of your life insurance protection. First, no one except you can cancel your personal life insurance policy. You also have ensured portability of your mortgage insurance when it comes time to renew your mortgage. You can then shop around for lower interest rates and better mortgage deals. If you are one of these people, it may be essential to note that creditor insurance is not able to be carried from one institution to another. Conversely, an individual life insurance policy may be kept as long as you wish and can be portable from one mortgage to another. With personal life insurance policies, you have the ability to shop around for mortgages and not worry about obtaining the lender’s creditor life insurance plan.

If you become uninsurable due to a health risk, personally owned policies continue because they do not need to be re-underwritten. You can convert most term insurance to other types of more permanent insurance if you prefer, regardless of your health status at the time of future conversion. Conversely, insurance purchased with the mortgage may be underwritten post-claim, which opens the potential for non-payment.

4. What about group plans offered at work? Group life insurance plans at work provide for basic life insurance benefits without any medical underwriting. You may also be able to buy additional coverage with a group plan, though never fully control the plan as an individual owner of the policy. Thus, group insurance only covers risk when employed. All bank or credit card plans are also group plans with no true ownership, portability, or long-term continuance.

Disclaimer: The following YouTube offers some insight into buying mortgage life insurance. In no way does this article intend to defame banks but to help you make the right decisions.


Publisher's Copyright & Legal Use Disclaimer

All articles are a legal copyright of Adviceon®Media.

The particulars contained herein were obtained from sources which we believe are reliable, but are not guaranteed by us and may be incomplete. This website is not deemed to be used as a solicitation in a jurisdiction where this representative is not registered. This content is not intended to provide specific personalized advice, including, without limitation, investment, insurance, financial, legal, accounting or tax advice; and any reference to facts and data provided are from various sources believed to be reliable, but we cannot guarantee they are complete or accurate; and it is intended primarily for Canadian residents only, and the information contained herein is subject to change without notice. References in this Web site to third party goods or services should not be regarded as an endorsement, offer or solicitation of these or any goods or services. Always consult an appropriate professional regarding your particular circumstances before making any financial decision.

Mutual Funds and/or Segregated Funds Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investment funds, including segregated fund investments. Please read the fund summary information folder prospectus before investing. Mutual Funds and/or Segregated Funds may not be guaranteed, their market value changes daily and past performance is not indicative of future results. The publisher does not guarantee the accuracy and will not be held liable in any way for any error, or omission, or any financial decision. Talk to your advisor before making any financial decision. A description of the key features of the applicable individual variable annuity contract or segregated fund is contained in the Information Folder. Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. Product features are subject to change.

Newsletter tags