How best to insure your mortgage

If you're offered the convenience of mortgage life insurance from your bank or other lending institution, explore the potential benefits of term life or permanent life insurance first.

Term life offers a number of advantages over mortgage life insurance:

Your beneficiaries can choose how to use the policy proceeds. Lenders’ mortgage insurance, however, pays the death benefit directly to the lender to discharge the loan.
With mortgage life insurance from your lender, the amount of coverage declines as the debt is reduced. With level term insurance, you can maintain the coverage.
Mortgage life insurance generally covers only the current mortgage term, which could be from six months to five years. You may face higher premiums at renewal, particularly if you develop health problems. On the other hand, if you have a 10-year level term policy, the premium costs are fixed for 10 years.
With regard to term insurance may be higher or lower than insurance from your lender. The price will depend on your health and other factors. Be sure to compare the costs.

If the need for protection is likely to continue or increase after your mortgage is paid off, permanent life insurance might be worth considering. If you expect to buy a vacation property, for example, you may need insurance to cover a new mortgage.

Permanent life insurance also provides a source of cash to cover capital gains tax liabilities as the property appreciates. Don’t make a decision this important without professional advice.