To get a mortgage, life insurance is mandatory. Your financial institution offers you mortgage insurance and the cost seems reasonable. Are you signing? Not so fast!
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According to several studies, more than 80% of Quebecers pay too much for their mortgage insurance. Shopping is therefore imperative.
Taking into account your age and state of health, mortgage life insurance offered by the financial institution is almost always more expensive than term life insurance from a private insurer.
In some cases, the difference can raise the mortgage rate by a quarter of a percentage point (0.25%) or more if protection is purchased from the lender. Over 20 or 25 years, we are talking about thousands of dollars of difference.
For example, if you are 40 years old, healthy and non-smoker, and your mortgage balance is $ 300,000 (paid in monthly installments), mortgage insurance (life only) will have cost you $ 14,400 after 20 years. In comparison, a term life insurance contract from a private insurer will have cost $ 9,266. Note that these figures are obtained with online calculators: an insurance broker will prepare a more realistic portrait of your situation.
Mortgage insurance protects against payment defaults. It is usually easier to obtain because its medical questionnaire is shorter than that of a private insurer, and you do not have to take a test (mandatory with a private insurer).
Since the mortgage insurance premium is calculated as a percentage of the loan, if the loan rate goes up, the cost of insurance goes up as well. Plus, mortgage insurance coverage ends when the loan is paid off, life insurance ends at the end of the contract (which can last much longer, especially if you've made annual mortgage prepayments due contract).
In the event of death, mortgage insurance only pays off the balance of the mortgage. Private insurance offers the full amount provided for in the contract, which covers several financial needs at the same time (car loan, line of credit, children's education, etc.). Disability insurance accompanying mortgage insurance will only reimburse the monthly loan payments. Private disability insurance covers all of your financial needs.
Finally, with life insurance coverage offered by a private insurer, it is you who designate your beneficiary (ies). With mortgage insurance, the beneficiary is the lender.
- Learn about the true cost of mortgage insurance, as it is calculated as a percentage of the loan. Desjardins is the only financial institution whose premium is set according to the balance, which decreases as the loan is repaid. Otherwise, the premium is usually fixed.
- If you change financial institution, you must renegotiate the insurance coverage: the premium could increase depending on your age or your health condition, which is not the case with term life insurance. a private insurer.
- You can consolidate all of your life and disability insurance needs into one contract with a life insurer, or increase your current coverage to account for the mortgage balance.