Spousal Insurance

Ray of Financial Highway wrote a guest post on the topic of mortgage insurance today. He pointed out that these products have a huge shortcoming:

Mortgage Insurance versus Life Insurance

I agree with CC, it's in your best interest to get term life for the length of your mortgage instead of mortgage life insurance.

CanadianCapitalist said:

Ray of Financial Highway wrote a guest post on the topic of mortgage insurance today. He pointed out that these products have a huge shortcoming:

Mortgage Insurance versus Life Insurance

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Thanks for the link CC! I think that was the article I was looking for!

with that being said, is there a life insurance that someone here recommends? I was planning on going with CAA with house insurance, but really don't know much else.

cheers,

v_tofu said:

Is there a life insurance that someone here recommends?

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Research your options and you'll probably find that term insurance is your best bet. There shouldn't be too much variation between the various providers but like always, shop around and get quotes from various sources.

I went with RBC insurance - they were pretty reasonable. You can arrange everything over the phone.

hope I don't get in too much trouble for bringing up an old post from the dead!

Anyways, since I last posted on this topic, our house is now built, we moved in, did all renovations and landscaping, and the baby is now sleeping (4 hr blocks is quite pleasant!).

I went to the bank a month ago to ask about this again, and I'm just wondering if someone can point out the differences between the mortgage insurance, and the term-life insurance? I have a feeling the Advisor was trying to sell me the mortgage insurance instead.

Mortgage insurance pays the LENDER (i.e., the bank) if the insured person dies.

Term life insurance pays the BENEFICIARY (usually the surviving spouse) if the insured person dies.

The other main difference is that mortgage insurance is NOT UNDERWRITTEN at the time of sale. You only find out if you qualify for the insurance AFTER death.

Finally, the amount of mortgage insurance decreases as your outstanding mortgage balance decreases. However, the premiums do not decline correspondingly.

Mortgage insurance is a bad deal for everyone but the issuer. The *only* positive is that it is cheap, at least in the early years of a mortgage.

v_tofu said:

Hi all,

Not sure if it is worded correctly, but I believe my mortgage specialist mentioned something about spousal insurance? i.e in case of death of your spouse?

From my understanding, if you have this spousal insurance, and something does happen to your better half, your mortgage is covered?

Your thoughts? Is this something that is normally purchased or waived by most home buyers? Is there similar type of insurance plans that can be purchased elsewhere?

cheers,

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You have multiple replies suggesting term life insurance is preferable to mortgage insurance. To go back to your original question, my guess would be the mortgage specialist was advising that both spouses should be insured, however you do it. You have to consider how will the surviving spouse continue to pay for the mortgage, and if there are children, pay for their care & education.

Marketplace did a great expose on the mortgage life insurance concept and what a scam it was. If you work out the numbers, there's no comparison, get term life insurance, it's much cheaper.

My banker thought I was crazy to expose myself to the risk. I told her no, I don't want it. I'll go buy my life insurance elsewhere.

GeniusBoy27 said:

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My banker thought I was crazy to expose myself to the risk. I told her no, I don't want it. I'll go buy my life insurance elsewhere.

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It isn't your risk she was worried about, it was the bank's. With mortgage insurance the mortgagor is certain of being paid off; doesn't have to hire lawyers & realtors to foreclose on some poor widow and sell the property; doesn't face risk of bad publicity for doing so. (plus someone is making a profit on the insurance - probably the bank now that they are in the insurance business too)

*laughing* ... ok, OGG, I guess you're technically correct. But my banker's not the swiftest of people, so I think she was actually worried about us.