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For insurance to be useful, you need to insure something you rely on, such as your income or your home.
I’m thinking about buying a house and I want to know if I need mortgage life insurance.
—Ed Remingo, Kitchener, Ont.
The short answer is no. For insurance to be useful, you need to insure something you rely on, such as your income or your home. “Mortgage life insurance insures the wrong thing,” explains Glenn Cooke, an independent broker who runs LifeInsuranceCanada.com. “You should be insuring your income, which is paying your mortgage.”
Another problem with mortgage insurance is your premiums remain the same over time, but the potential payout drops as your mortgage is paid off. A cheaper option is term life insurance, where both your premiums and your coverage remain level. Term insurance has other advantages, too. “Mortgage insurance pays the creditor, term insurance pays your beneficiaries,” Cooke says. “It gives your beneficiaries more choice.”
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