Often times people buying their first home are not made aware that mortgage insurance does not have to be purchased from the lending institution (usually a bank).

In fact, term life insurance is almost always a better alternative to bank mortgage insurance. There are many reasons for this, including the following:

• With term life the beneficiary is the person you name (e.g. husband or wife), as opposed to the bank.
• The payable benefits remain the same for term life, as opposed to the bank insurance that only pays the remaining amount owing on the mortgage.
• Term life policies can be renewed at a later time and converted to permanent life insurance. Bank mortgage insurance is not renewable or convertible.

Time and time again we have situations where people we talk to end up saving a lot of money by switching their bank mortgage insurance to term life (one reason for this is the low current term life rates).

The following relates the experiences of one of our clients:

"I recently purchased my first home 6 months ago. Like most first-time home buyers I was elated at the prospect of finally owning my own home and naturally financed my mortgage through my local bank. As the time of closing neared, the bank informed me that I would have to insure my mortgage which was for $350,000. I asked them how to go about this, and they told me that they would take care of the details and prepare the paperwork for me. Being somewhat busy with all of the other things that had to be done such as packing, getting ready to move, etc., I was more than a little relieved as it was one less thing to
worry about, and I signed the paperwork.

About 6 months later I was online at your life insurance web site looking to find out about web insurance. I contacted your company and was asked if I had any other insurance in place. I told him about the mortgage insurance and he informed me that the bank's mortgage insurance usually had three factors that needed to be looked at:

1. The lending institution name themselves as the beneficiaries.
2. The rates tend to be high.
3. When a bank pays benefits it is only the remaining principal on the mortgage that is paid out.

I was informed that I could get term insurance to protect my mortgage instead, and that the rates would be much lower and that I could be the named beneficiary.

I applied for the term life, and I am now paying $78/month instead of the $142/month I was paying for my bank mortgage insurance (I cancelled that policy after my term life went into effect on the advice of your broker). I named my husband my beneficiary, and if something happens to me he will get the entire proceeds of my policy ($ 350,000 instead of the remaining mortgage principal)."

Ann Ritchie,
Toronto, Ont.