Mortgage Protection for Homeowners Using Term Life Insurance
New homeowners will receive an offer from their bank for "Mortgage Protection Insurance", not to be confused with Private Mortgage Insurance. Mortgage Protection insurance offered by the bank pays off your mortgage upon your death. This may sound appealing, but Mortgage Protection Insurance may not be the best option for your family. I've compared it with term life insurance below.
Mortgage Protection Insurance (Offered by Bank)
- Benefit decreases as the mortgage balance drops.
- Will need to secure a new policy with a refinance.
- Funds are directed to payoff the mortgage upon death.
- Fast issue, generally more expensive than fully underwritten policy.
Term Life Insurance (Offered by Insurance Agent)
- Death Benefit stays level throughout term.
- Freedom to chose the amount and term that are right for you.
- Family will have funds to maintain lifestyle after your death.
- Flexibility to use the funds as the beneficiary sees fit.