Mortgage … Life Insurance in Ontario - What’s the difference?
Insurance plays a crucial role in protecting your family's financial future.
Among the many types of insurance options available, two common types often come into focus: life insurance and mortgage insurance.
Georgia bought a house at 21, and as it was an overwhelming and stressful experience, she trusted the bank to guide her in the correct direction.
She is now 29 and stopped in at CC&Associate for some financial planning advice.
The first thing we asked her was if she had life insurance. The answer was no, but she said confidently that she had bought mortgage insurance.
While mortgage insurance serves a specific purpose in homeownership, life insurance offers comprehensive financial protection far beyond mortgage obligations.
Life insurance is a versatile financial tool designed to provide a lump sum payment to beneficiaries upon the insured's death. It is a better value for your money.
Before we dig in, we’re CC & Associates, a financial service provider helping women and families prepare for their futures and organize their finances so they can make big purchases, save for retirement, and stop worrying about money.
Got Questions?
Now, let’s get into it.
A closer look at mortgage insurance and its limitations:
Protection for Lenders, Not Borrowers: Unlike life insurance, which directly benefits beneficiaries, mortgage insurance primarily protects lenders in case of borrower default. It does not provide any financial assistance to the insured's family.
Coverage Decreases with Mortgage Balance: Mortgage insurance coverage decreases as the outstanding mortgage balance decreases, offering diminishing protection over time.
Non-Transferable and Non-Refundable: Mortgage insurance is non-transferable and tied to a specific mortgage loan. Once the mortgage is paid off or refinanced, the coverage terminates.
Limited Scope: Mortgage insurance only covers the outstanding mortgage balance and does not provide additional financial assistance for other expenses or needs of the insured's family.
Life Insurance: Policy paid to the beneficiary
Flexible Coverage: Life insurance policies offer flexible coverage amounts and terms. Whether you need coverage for a specific period or lifelong protection, there's a policy to suit your needs.
Financial Security for Dependents: The primary purpose of life insurance is to provide financial security to dependents in the event of the insured's death. It can help replace lost income, cover outstanding debts, fund education expenses, and maintain the family's standard of living.
Tax-Free Death Benefit: The death benefit paid to beneficiaries under a life insurance policy is typically tax-free, providing a substantial sum without the burden of taxation.
Cash Value Accumulation (for Whole Life and Universal Life): Certain types of life insurance, such as whole life and universal life, accumulate cash value over time, which can be accessed through loans or withdrawals for various financial needs.
Portability: Life insurance policies are portable, meaning you can maintain coverage even if you change jobs or relocate.
We believe Georgia should cancel her mortgage insurance and apply for a life insurance policy.
Life insurance offers flexible coverage, tax-free benefits, and cash value accumulation to safeguard your family's financial future against life's uncertainties.
Life insurance remains the cornerstone of sound financial planning, providing peace of mind and protecting what matters most.
Reach out today for personalized advice and accurate quotes tailored to your situation.
I hope this helps!
CC&Associates