Learn more about the
Term Insurance Alternative

Many people talk about buying “term insurance” as an alternative to programs like Mortgage Protection Plan. That sounds like term insurance is a type of policy, but in fact it is a short-hand term for a whole family of products, the cost of which can vary widely.

Let’s talk about Steven, a 32-year-old non-smoker, with a $200,000 mortgage. He got Mortgage Protection Plan, which costs only $16 per month. Still, he wants to be sure that he’s not over-paying for his protection.

Naturally, Steven heads to his computer and finds one of the many websites that will quote life insurance premiums for him. The first quote is around $15 per month. That’s a pretty attractive price, but not that much different than the Mortgage Protection Plan premium.  Based on what he’s heard — “ that term is always cheaper” — he thinks there must be better options out there. So he tries a different site.

But this time his quote is close to $30 per month - almost double the cost! At first, he thinks that he’s just stumbled across a really uncompetitive company, but then he notices that it’s the exact same insurance company who gave him the $15 quote. What’s going on?

What Steven has just seen is how different the cost can be for different types of term insurance protection. Here are some of the key options and features that determine the premium you will pay.

“How often is the premium adjusted?”

With the least expensive form of term insurance, your premium will go up every year. This is not a very common product, but you might be looking at your premium going up every five years, or in ten years, or it might even be fixed for as long as you have the policy. The longer that period of time is, the more the insurance will cost.

In Steven's case, his $15 term life premium was only guaranteed for the first 10 years. When your mortgage is going to last 20-30 years, you need to consider what your insurance is going to cost over a long period of timenot just what it costs when you initially buy it. 

“What happens if my health changes?”

If you want to be sure of having your protection for as long as you have your mortgageand without significant premium increasesthen something like 10-year term insurance is not for you.

At the end of 10 years, Steven could be looking at paying significantly more than $15 if he has developed a health issue during that time. First, his premium would automatically increase due to the fact that he’s now ten years older. If his health has deteriorated at all, he’ll be looking at an even bigger jump in cost.

It is possible to buy term insurance coverage that does not require periodic re-checks of your health, or that has premium guarantees built in, but it isas you might guessquite a bit more expensive.

"And what about Mortgage Protection Plan?"

People use term insurance for many different purposes, and that’s partly why there are a lot of different types of term insurance policies. Mortgage Protection Plan was designed for just one purpose - to protect your mortgage. So ... 

The premium you pay on Day 1 is the same one you pay for the life of your mortgage. Your cost doesn’t go up every time you get a few years older.
Once you are accepted, it doesn’t matter what happens to your health. Your coverage is secure for as long as you have your mortgage.

So, let’s see if Steven’s $16 quote for
Mortgage Protection Plan is a good buy or not.

Sure, he could get term insurance for a little bit less money, but not much. More importantly, his Mortgage Protection Plan coverage is locked in—the cost is not going to go up as he gets older, and any changes in health during the life of the mortgage will be of no consequence. These are benefits he is simply not going to get with the 10-year term policy he first considered.

You do need to be aware that if you buy a new house or refinance, and you increase the amount you owe on your mortgage, you’ll need to apply for an increase in your Mortgage Protection Plan coverage. The amount you need to add is treated as a new application and your current age and health condition will come into play thenbut just for the extra coverage you need. Your existing level of protection will stay exactly the same, no matter what.

       
 
Do you need protection?
Anyone who has a mortgage needs to protect it somehow. Otherwise, you risk losing your home should there be a death or disability in the family.
Learn more.
  Mortgage brokers, 
are your clients protected?

Learn more about
Mortgage Protection Plan.