How much should I choose for mortgage insurance?

How much should I choose for mortgage insurance?

The mortgage is probably the biggest debt you will ever face in your life. In fact, hundreds of thousands of dollars represent a large sum to repay… whatever the cost. And one thing is certain, debt does not go away on its own, even if one of the spouses dies. The survivor must therefore continue to make the payments, but only with his own income.

However, there are solutions to help the survivor keep the home, even when disaster strikes: insurance. There is mortgage insurance, of course, but there are other types of products that you can choose from that will allow you not only to pay off your mortgage, but other debts as well. What amount to target for mortgage insurance? The answer can vary greatly from one protection to another. So here is an overview of the possibilities.

Different types of protection

At the time of signing, you will be strongly advised to opt for mortgage insurance offered by the bank. At first glance, you will be tempted. But this might not be the best product for you. After all, a mortgage insurance contract from a bank does not belong to you. You will therefore never be able to use it as you see fit, since the bank will pay itself on the death of one of the policyholders. You will never see the color of that money, despite the premium paid each month. But at least the survivor will be released from the financial liability of the mortgage and will be able to keep the house. Here, the question of the amount does not therefore arise, since the latter will correspond to the balance of the mortgage. Mortgage insurance will also be variable, meaning that its value will go down along with your mortgage balance.

In return, you can opt for term life insurance, which will certainly cost you less in terms of premiums. The money will go to the beneficiary of your choice and when you die, they can dispose of it as they see fit. Not only will he be able to pay off the mortgage, but he can use the balance to pay other debts or invest in retirement, for example. It is clear that in order to be successful in doing all of this, the amount of insurance will have to be higher than the mortgage itself, which is quite possible in this case. For example, your mortgage balance is $ 250,000, so you can decide to take out term life insurance for $ 300,000 with no problem. It's all about the premium.

There is also loan insurance, a complementary product that pays off your loan if you die before you have paid it yourself. The principle also applies if you become disabled. Again, the insured amount is the loan balance.

In the end, either solution frees you from significant debt and that’s the bottom line. The amount depends on you, your ability to pay and your initial goal. Contact an Infoprimes expert for more information on the subject and to find protection tailored to you.