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What is mortgage protection insurance?
When purchasing a home and obtaining financing to complete the sale of a home, mortgage lenders often offer consumers the option of buying mortgage insurance, or creditor insurance as it’s sometimes known by.
Mortgage insurance can pay some or all of the outstanding principle amount owed on the mortgage to your lender in the event of your death. The idea is that insurance takes care of your family’s interest in the home.
The challenge for your family may be that their financial needs extend beyond just a mortgage, and may have other expenses to cover as well. Mortgage insurance pays all or part of your mortgage debt, but does not leave any money for your family.
Flexible alternatives to mortgage protection insurance
Sun Life offers several alternatives to mortgage protection insurance that enable your family to protect your mortgage while also giving them the flexibility and choice to use the benefits as needed.
Choosing term life insurance and critical illness insurance could give you and your family the right protection when you need it most.
Types of mortgage protection insurance:
Choosing both term life insurance and critical illness insurance together gives you and your family the right protection when you need it most.
Critical illness insurance
- If you become seriously ill, you’ll receive a lump-sum payment to spend as you choose, on things like mortgage payments or medical expenses so you can focus on recovery.
Term life insurance
- Provides affordable, flexible protection that your loved ones could use to pay off your mortgage or cover other expenses if you die unexpectedly.
The difference between mortgage insurance policies and Term life and Critical illness insurance
Most mortgage lenders will give you the option to apply for mortgage insurance directly through them. But before you finalize your mortgage, think about how different their policies are from ours.
|
Mortgage insurance through a mortgage lender |
Term life insurance |
Critical illness insurance |
|---|---|---|---|
Who does the insurance cover? |
One or more of the individuals listed on the mortgage |
You, your partner and your children – you can protect your whole family, even those not responsible for paying for your mortgage |
You, your partner and your children – you can protect your whole family, even those not responsible for paying your mortgage |
Coverage |
Covers the remaining balance outstanding on your mortgage only |
Anything your loved ones need it to cover. In addition to your mortgage, it can cover debts like your line of credit, credit cards, etc. |
Anything your loved ones need it to cover. In addition to your mortgage, it can cover debts like your line of credit, credit cards, etc. |
Who gets the benefit if I die or become seriously ill? |
The mortgage lender is automatically the beneficiary |
You decide who gets the insurance benefit |
You decide who gets the insurance benefit |
What happens as my mortgage balance decreases? |
The coverage amount decreases as the mortgage balance decreases. Your rates stay the same. When the mortgage is paid off, the coverage disappears |
The amount of coverage stays the same for as long as you own your policy – unless you decide to change it. Your rates won’t go up. |
The coverage amount stays the same for as long as you own your policy – unless you decide to change it. Your rates won’t go up. |
What if I switch mortgage lenders? |
You may lose the coverage and might need to reapply. Your premiums may be different each time because the rates may have changed since your previous application. You may also have to answer health questions when you re-apply. |
Your coverage stays the same – unless you decide to change it. Since your coverage is not tied to your mortgage, you can carry it with you if you move again |
Your coverage stays the same – unless you decide to change it. Since your coverage is not tied to your mortgage, you can carry it with you if you move again |
How can I apply? |
You would have to check with your mortgage lender. |