I know! Isn’t this a terrifying thought? Scary thing is, it’s true. Back in 2008 CBC MarketPlace did a documentary on mortgage insurance and at that time only 3% of mortgage insurance paid out! That was only 10 years ago!
Ok, since 2008, they have become better. However, it is still not guaranteed to pay out. For me, I would rather reallocate that money and get some life insurance to cover my mortgage.
There are huge differences here between mortgage insurance and life insurance:
If mortgage insurance pays out, it will only pay off the mortgage. That’s great, but what about the mom or dad that’s left at home with the 3 kids with no income coming in to raise them or put food on the table? With life insurance, you can decide how much insurance you want so that the mortgage is paid off, income is replaced for x amount of years and maybe there is extra in there for the kids’ education. You decide - and this money will go directly to your beneficiary!
Some mortgage insurance rates go up every time you renew your mortgage. Your life insurance only goes up when your term is up. This could be every 10, 15, 20, 25, 30 years; whichever term you’ve chosen.
Some life insurance is actually cheaper than mortgage insurance!
This is just a small list of the differences but you get the point. It’s best to lump all your creditor insurance into a customized just for you life insurance policy.
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