Mortgage life insurance for seniors

by Glenn Cooke

09/20/22

Seniors have two ways to life insurance their mortgage. The first is bank mortgage life insurance, which is a subset of creditor protection insurance. The second choice is individual term life insurance through an independent broker such as The Term Guy, here at mortgageinsurance.ca.

Consumer advocates agree – you should always choose term life insurance over bank mortgage life insurance. There’s a variety of reasons why.

First, price. Bank mortgage life insurance is substantially more expensive compared to a term life insurance policy. You’ll save a bunch of money every month by switching your bank mortgage life insurance over to a term life insurance policy.

Secondly, is product features. Bank mortgage life insurance is a substandard life insurance product compared to term life insurance. Here’s some of the policy differences between the two types of mortgage life insurance coverage:

  • Term life insurance as offered here is Renewable, which means you can continue the policy for life. You select how long you want the premiums to be level for initially. After that time, premiums increase every 10 years to age 85, then they are level for life thereafter. At age 100, the policy becomes fully paid up. Bank mortgage life insurance on the other hand, the premiums increase every time you change your mortgage (generally every 5 years).
  • Term life insurance is Convertible. Up to age 71, you can swap your term life insurance policy for a permanent, lifetime policy WITH NO MEDICAL QUESTIONS. Mortgage life insurance is generally over at around age 70 – it stops, and no further coverage is available.
    The above two features become increasingly important for seniors, as our health is generally not improving over long periods of time.
  • Accelerated death benefits: under certain conditions (generally you’re mortality is less than a year) you can access a percentage of your life insurance benefits while still alive with term life insurance. No such benefit is offered with bank mortgage life insurance.
  • With term life insurance, your life insurance coverage remains level – if you purchase $250,000 of coverage, it stays at $250,000 as long as you keep the policy. With mortgage life insurance from the banks, even if your premiums remain level, your life insurance coverage goes down as you pay down your mortgage. That’s right – with bank mortgage life insurance even if your premiums remain level for a period of time, you’re paying for less and less coverage over time.

Quote prices of banks vs term life now

All of these benefits are important, but in particular the Renewable and Convertible benefits available on term life insurance policies become every more important as seniors get older and become more at risk to developing a health factor that makes them uninsurable. With Renewable and Convertible term life insurance, seniors can either continue their existing life insurance for life, or convert it to lifetime coverage with level premiums, no matter how uninsurable you’ve become. With bank mortgage life insurance, without these options, if you become uninsurable and you change your mortgage – you will be out of life insurance (since you’ll be seeking new mortgage life insurance at the bank, but won’t be able to qualify).

If you’re a senior and have questions about your mortgage life insurance or would like personal assistance, please call (866) 779-1499 and we’ll be happy to speak with you.

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