If you own a home, chances are you have a mortgage. There are multiple types of mortgages – open-ended, close-ended, fixed rate, variable, etc. In the recent years we saw the emergence of so-called all-in-one accounts which combine checking and savings accounts, a line of credit and a credit card with a mortgage. This can significantly reduce your overall interest expenses and enable you to be debt-free years earlier, while at the same time providing convenience and ease of management by giving you only one combined monthly statement. But this is a subject of one of our next posts…

One thing is common for all mortgages – a mortgage is nothing but debt. And for most people this debt is the largest they will ever have in their lives. If something happens to a mortgage owner, their surviving family can be left with an unbearable burden. Therefore, many homeowners choose to buy life insurance when they get their mortgages. But they don’t realize that mortgage life insurance offered by banks doesn’t work in the same way as traditional personally owned life insurance.

Let’s take a look at a few differences. Getting insurance by simply checking a box on a mortgage application may be convenient, but this convenient comes at a cost. Insurance bought from a bank is often significantly more expensive that traditional insurance. Your mortgage balance goes down every year, and so does your insurance coverage. With traditional insurance, your coverage stays the same. And because you own your policy, not the bank, your family will decide what to do with the money. With bank insurance you have no control – the insurance will simply take care of the mortgage. When you change your lender, you will also have to change your insurer.

There is no guarantee that you can get the coverage again. But if you have a traditional policy, you are free to change your lenders and your insurance will always stay with you. If you have mortgage life insurance, it makes a lot of sense to consider a better alternative. You may not only save your money, but also protect your loved ones, not your lender.