In collaboration with PolicyMe.

A mortgage is one of the most significant financial commitments you’ll make in your life; a reality we’re sure has already sunk in! And if you’ve just bought your first home, you’ll want to protect that purchase and the people who depend on you. That’s where life insurance comes in. 

Life insurance is essential in ensuring your home is protected if you were to pass away prematurely. In this article, we’ll walk you through the ins and outs of getting life insurance with your mortgage, so you can breathe a sigh of relief knowing your mortgage, and by extension, your family, will be taken care of in the worst-case scenario.

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Key Highlights

• Life insurance provides a payout if the policyholder passes away during the policy.
• The payout can be sent directly to your mortgage lender (for mortgage life insurance) or a beneficiary, such as your spouse (for term life insurance).
• Term life insurance is an excellent option for those looking to protect their mortgage and cover any additional expenses, such as childcare or other debts.

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Benefits of having term life insurance with your mortgage

Life insurance provides a financial safety net for your loved ones in the event of the unimaginable. If you’re a homeowner, a significant part of that protection is ensuring your family can stay in your home. 

It also provides a tax-free lump sum payout to the policyholder’s beneficiaries in the event of the policyholder’s passing away. This payout is referred to as a “death benefit” and can be used to cover any expenses your loved ones may need, including mortgage payments.

If you’re like many other Canadians, paying your mortgage is already a significant financial stressor. It’s not a pleasant thought, but ask yourself: if you weren’t around, would your family still be able to afford your monthly mortgage payments?

That’s why having a life insurance policy in place is key in protecting your home and the people who live there. Life insurance will allow your family to maintain their lifestyle and continue making memories in the home you’ve built together.

But if you’ve just put down a downpayment on a home, it can be hard to think about adding another monthly payment to your already tight budget. Thankfully, life insurance doesn’t have to be expensive. In fact, it can cost as little as ordering takeout per month. That’s a small price to pay for peace of mind.

Choosing the right life insurance to pair with your mortgage

When choosing a life insurance policy to pair with your mortgage, there are a few important factors to keep in mind:

• Your mortgage balance: Ensure you choose a coverage amount that will be sufficient to cover it.
• Your mortgage length: Your life insurance should cover you for at least the length of your mortgage term.
• The type of life insurance: There are several different types of life insurance to choose from.

When it comes to protecting your home, we’ve picked 3 popular types of life insurance to look at. Let’s break them down.

Term life insurance

Term life insurance provides coverage for a fixed period (or “term”). Common term lengths are 10, 20, or 30 years. Your beneficiaries will receive a payout equal to your coverage amount if you pass while the policy is active.

Your loved ones can use this payout for anything, including:

• Mortgage payments
• Covering other debts
• Final expenses
• Childcare costs
• Tuition for your kids
• Day-to-day expenses

Term life insurance is the best type of policy if you’re looking to cover your family’s temporary responsibilities and financial obligations. When deciding on a term length, you can match it to the length of your mortgage, ensuring your mortgage is protected until your home is paid off.

Plus, term policies are more affordable than many other types of life insurance. That means you’ll have coverage for just as long as you need it at a price you can afford, making it a great product to pair with your mortgage.

Whole life insurance

Whole life insurance provides coverage for your entire life, as long as you keep paying premiums. Like term life insurance, the death benefit can be used for anything your loved ones need. There is also a cash-value component to this type of policy.

Whole life insurance can become expensive due to its cash value and lifelong coverage; however, monthly premiums can be up to 7.5x more expensive than a comparable term policy, making it potentially difficult to fit into your (already stretched) budget.

Mortgage life insurance

Mortgage life insurance is a type of coverage designed to pay off your mortgage balance in the event of your passing away.

You can get this type of life insurance through banks, independent insurance companies, or through your mortgage lender. Your premiums are based on your age and mortgage amount and are added to your regular mortgage payments.

With mortgage life insurance, the payout goes directly to your mortgage lender to cover the remaining balance on your mortgage. That means that your family or estate will own the property outright, no further payments required.

Applying for life insurance with your mortgage

Once you’ve got your mortgage sorted, it’s time to start shopping around for a life insurance policy.

Premiums can vary widely depending on your age, health, coverage amount, and other factors.  To make sure you’re getting the right coverage for your needs, try using an online life insurance calculator.

Prices will also depend on which insurer you choose, so it’s a good idea to shop around and obtain quotes from different companies to ensure you’re getting the best policy for the best price.

When you’ve found a policy that fits your needs and budget, you’ll need to apply for coverage. Most insurers will ask you to complete an application that asks for basic information about your age, health, lifestyle habits, and family medical history. 

With specific insurance solutions, such as PolicyMe, you can complete the entire application process online. From getting a quote to finalizing your policy, getting life insurance can be quick and simple with no unnecessary in-person meetings.

Once you’ve got a policy in place, you can rest easy knowing your family is protected in the home you’ve made together.

Final Thoughts

Regardless of the policy you choose, having life insurance in place is a crucial step in protecting your mortgage. With a life insurance policy, you can rest assured that your loved ones will be able to stay in the home you’ve made together, no matter what tomorrow brings.

Congratulations on your new home!

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