The Differences Between Mortgage Default Insurance and Mortgage Life Insurance

If you’re buying a home or renewing an existing mortgage, you may be offered group insurance by your lender or broker. You put a lot of money towards your home, so it’s worth taking steps now to protect your investment. Mortgage insurance is typically marketed towards new homeowners who may be concerned that an unexpected death or illness could leave their loved ones with a large mortgage. Personal life insurance like mortgage insurance can perform a similar function for you but isn’t tied to just covering your mortgage. It’s designed to provide your beneficiaries with money in the event of your death. Its flexibility allows your beneficiaries to use the money for whatever purpose they wish. It’s an individual insurance product. Main differences Mortgage insurance from the bank covers the balance of your mortgage, which decreases as the mortgage is paid down. Personal mortgage life insurance coverage, meanwhile, stays the same and isn’t linked to your mortgage. The insurance from the bank doesn’t protect you. Instead, it protects your lender Mortgage insurance from the bank ends when your home is paid off. A personal life insurance policy is unaffected by your mortgage ending and can keep providing you and your family with protection in the years that follow. Mortgage insurance from the bank provided through a financial institution is typically quick and easy to arrange, and usually only requires answering a few health-related questions. Buying personal life insurance, on the other hand, typically takes longer and involves delving into your medical history. The bank is considered your benefactor, not your family. While the mortgage will be paid off, your family won’t receive anything. Also, the amount of coverage declines as you pay down your mortgage. With regular life insurance, your coverage remains the same. And if you decide to change lenders, your insurance isn’t portable, so you’ll lose your coverage.

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