A Cost Comparison Between
Bank Credit Insurance and Mortgage Life Insurance
The experience of buying your first home can be a bit overwhelming. There are a lot of steps involved, papers to sign and finances to get in order. After your mortgage is approved, your responsibilities don’t end there.
A major consideration after you’ve been approved for your mortgage is choosing the right insurance.
As a first time homeowner, if your down payment is less than 20%, most lenders (the banks) require you to have some type of protection as they see you as a riskier investment.
The idea of having this insurance is financial protection in the event of sudden death. Your spouse or family may not be able to pay off your debts, and your mortgage is likely to be your largest debt. Having proper insurance means money is available to them when it’s needed most, which enables them to spend more time on helping each other cope, and spend less time on how to pay the bills.
The terminology of insurance types can be a bit confusing. You can get credit-life insurance through the bank, or you can get mortgage-life (or term life) insurance through an independent broker. We know… it’s tricky.
To sum each insurance type up: Mortgage-life insurance is purchased through an independent financial advisor and protects you and your family from financial debts in the event of death. Credit-life insurance is purchased through the banks, but only protects the banks if you suddenly pass away. As long as your mortgage-life coverage matches or exceeds your mortgage amount, it satisfies the bank’s rules often requiring you insure your mortgage.
Check Out A Live Demonstration Of The Cost Difference
Banked Owned Policy Details
Before you accept the bank’s in-house insurance after approving your mortgage, you should know how they differ. It is very important.
Most personal finance agents and advisors will tell you that insurance through an independent broker is almost always a better deal than through the bank. Why? Good question.
A policy through independent mortgage-life insurance promises you several things a policy through the bank cannot. With credit life insurance:
Independent Broker (Self-Owned) Policy Details
As you can see, there are many reasons why mortgage-life insurance is superior to credit-life insurance from the bank. Since the law requires you to have insurance, you deserve a policy that lets you and your family call the shots. Your family will decide if the money pays off the mortgage, or goes towards other expenses such as funeral costs, living costs, loss of income, or paying off other higher interest debts. Call your local insurance advisor today for more information.
Case Studies
To illustrate this last point on cost, we’ll introduce you to John & Bill, two recent home buyers who are shopping around for mortgage life insurance policies and comparing prices.
Scenario 1: Meet John
25 year old first time home buyer.
Buys his home for $300K with a 30 year mortgage.
John Dies at 41 (16 years into mortgage)
John owes $145K on his home.
Bank Owned Premiums
$80/month - Initial Premium
At age 30, John’s premium is $115/month.
At age 35, John’s premium is $190/month.
At age 40, John’s premium is $250/month.
The only thing that gets paid off is the balance of his mortgage ($145K).
By age 41, John has paid $26,100 in premiums.
Independent Broker Premiums
~$30/month - For The Life of mortgage.
At age 30, John’s premium stays $~30/month.
At age 35, John’s premium stays $~30/month.
At age 40, John’s premium stays $~30/month
The full $300K gets paid out (his entire policy amount, not just the balance owing on the mortgage).
By age 41, John has paid $5,546 in premiums.
Conclusion
Conclusion - John pays $20,554 less in premiums by purchasing insurance through an independent broker vs the bank, and his family (not the bank) receives an extra $155k in payouts.
Scenario 2: Meet Bill
A 50 year old retiree who has just bought a second beach house.
Buys his home for $500K with a 30 year mortgage.
Bill dies at 66 (16 years into mortgage)
Bill owes $250K on his home.
Bank Owned Premiums
$375/month - Initial Premium
Age 50-55, Bill’s premium is $375/month.
Age 55-60, Bill’s premium is $450/month.
Age 60-65, Bill’s premium is $700/month.
The only thing that gets paid off is the balance of his mortgage ($250K).
Bill has paid $91,500 in premiums.
Independent Broker Premiums
$267.75/month - For the life of the mortgage
Age 50-55, Bill’s premium stays $267.75/month.
Age 55-60, Bill’s premium stays $267.75/month.
Age 60-65, Bill’s premium stays $267.75/month
The full $500K gets paid out (his entire policy amount, not just the balance owing on the mortgage).
Bill has paid $51,408 in premiums.
Conclusion
Bill pays $40,092 less in premiums by purchasing insurance through an independent broker vs the bank, and his family (not the bank) receives an extra $250k in payouts.
As you can see, both John & Bill greatly benefit from purchasing their policies through an independent insurance broker like Worb Financial. They will pay thousands less per year in premiums, and receive their full pay out no matter how much they have left on their mortgage; the money from the payout will go to helping their families, not the bank.
If you would like to find out what your premiums will be by choosing an Independent Insurance Broker, we’d love to help you. Fill out this form and we will get back to you with a quote shortly.
Ready To Discuss Your Mortgage Insurance Options?
Why Worb Financial?
Custom Solutions Tailored To Your Needs
We do not believe in a "one-size fits all" approach to Insurance, and will always bring you the best options for your unique situation... Even if this means recommending another provider.
Family Owned & Focused
We are a small team of dedicated professionals who treat each and every client like they are family. No matter what, we will help you understand your options and most importantly the importance of life insurance.
Canada-Wide Service
Licensed in Manitoba, Ontario, and British Columbia so we can serve you best no matter where you are.
LIFE INSURANCE
Life is unpredictable and amazing. We have the skills and knowledge to help you discover the best options and coverage.
EMPLOYEE BENEFITS
We’ll assess your companies needs and help you pick the right coverage to keep your staff happy.
FINANCIAL ADVICE
While you may have an idea of where you want to invest your money, it’s our job to know.
CRITICAL ILLNESS INSURANCE
Health risks are real, which means it’s important to be covered and prepared. While it’s not ideal to think about, it is important.
About Blair
Blair Worb
Blair Worb, Worb Financial’s CEO and owner, has been practicing life insurance for over 27 years and opened Worb Financial in 2000. Blair tenaciously seeks the best solutions and solves problems for his clients. He assists individuals, groups, and small businesses, providing employee benefits consulting for companies ranging in size from 3 - 100 employees.
Ready To Discuss Your Mortgage Insurance Options?
Phone Number
E-mail address
