Insurance for your Mortgage: Banks vs. Insurance Companies

Ahh... Just the thought of having your own private place makes you feel all tingly inside. Aside from the personal space that it guarantees, you also get to build your equity in an investment that will surely appreciate over time. Comes along with it, however, is the shivering truth of getting a mortgage loan to actually acquire the property (unless you can come up with a large amount of cash upfront -- very unlikely, especially in Vancouver).

Aside from all the major requirements and assessments to get approved for a mortgage loan, banks also need assurance from you that they will be paid back in the event of life's unfortunate occurrences (ie. disability, illness, or death). This is what we call the mortgage insurance. During the lifetime of your mortgage loan, this insurance secures your ability to payoff your loan with them and the roof over your and/or your family's head. Banks ask borrowers if they want this insurance, which the latter usually agrees to. After a few questions and for a few dollars of insurance premium added to your mortgage payments, you're basically good to go.

Well, think again.

CBC News published an article, which compares getting a mortgage insurance with the banks and getting a life insurance from insurance companies (http://www.cbc.ca/news/life-insurance-a-cheaper-alternative-to-mortgage-insurance-experts-say-1.615705). The article details the advantages of getting a life insurance with insurance companies, which I have summarized in the table below:

Now that you're aware of the differences between the two sources, as a borrower, you have the right to be mindful of where you put your dollars in. You've already made a smart decision in investing in an appreciating investment; it's also vital to be smart in your insurance coverages.

The bank's role is to accept deposits and give out loans; insurance companies' role is to insure. It might seem, at first, that you're getting a deal of a cheaper insurance premium with the banks, but look ahead, and you'll see a greater value in getting it with an insurance company.

Tell me what you think by commenting below!