Understanding Mortgage Insurance vs. Term Insurance: What You Need to Know.

It's critical to understand the different kinds of insurance accessible when it comes to safeguarding your financial future, particularly when buying a property. Mortgage insurance, often known as creditor insurance, and term insurance are two frequently mentioned choices. Both protect your loved ones, but they do so in different ways.

Mortgage insurance covers the outstanding balance of your mortgage loan. If you pass away while the policy is active, the insurance company pays the remaining balance directly to your mortgage lender, ensuring your family can keep the home. The coverage ends either when the mortgage is fully paid off or when you switch lenders—whichever happens first.

Term insurance, on the other hand, is a form of life insurance that provides coverage for a specific period, typically between 10 to 30 years. You have the flexibility to choose the amount of coverage that best suits your needs. If the insured individual passes away during the term, the policy pays a death benefit to the beneficiaries, which can help cover not only the outstanding mortgage but also living expenses, or any debts. This type of insurance is designed to provide financial security to your loved ones in the event of your untimely death.

So, before you sign on the dotted line, know what you’re getting into.

Maria Depalma

Insurance Advisor