Blog Post

Term Life Insurance vs Mortgage Protection Insurance

Pedro Diaz • Jul 19, 2022

Comparing the two. Which one is better?

For many people, their home is their most valuable asset. Protecting that asset with term life insurance can make sense for a number of reasons. Mortgage protection insurance is another option that can provide peace of mind in the event of your death. So, which is right for you? Here's a look at the pros and cons of each.


Term life insurance is a type of life insurance that provides financial protection for a set period of time, usually 10-30 years. If the policyholder dies during the term, the beneficiaries receive a death benefit. Term life insurance is generally less expensive than other types of life insurance, making it a good option for people on a budget.


Mortgage life insurance is a type of policy that is taken out by the borrower and pays off the outstanding balance on the mortgage in the event of the borrower's death. While this may sound like a good idea, there are actually several reasons why mortgage life insurance is not a good idea.


First of all, term life insurance policies are much cheaper than mortgage life insurance policies and provide more comprehensive coverage.  If you do die while you have mortgage life insurance, your beneficiaries will not receive the full value of your policy. They will only receive enough money to pay off your mortgage. For example, if you started with a $500,000 mortgage balance but you die when the mortgage balance is only $200,000, that is all that the policy will cover. Term life insurance policies will pay the entire $500,000 benefit in this case.


Secondly, term life insurance pays the death benefit to your designated beneficiary. However, mortgage life insurance will pay the benefit to the bank. While your mortgage may be paid off, mortgage life insurance will leave your family without additional funds for other expenses they may incur.


Thirdly, mortgage life insurance is tied to your lender and mortgage. If you ever plan to switch lenders, or even refinance, you will have to apply for coverage again. That might not sound too bad in theory but the reality is that mortgage life insurance premiums are based on the lenders age. The older you are, the higher the premiums will be. So if you are looking to refinance your mortgage a few years down the line, you can be certain that the premiums will be more expensive. With term life insurance, the policy is not tied to your bank or mortgage. The coverage, and premiums, will remain the same whether you change lenders, refinance, or even pay off your mortgage sooner.


Lastly, mortgage life insurance is underwritten at time of death, also called "post-claim" underwriting. That means that your eligibility for coverage is determined only after you have died. At this point, it is very easy for the lender to deny the claim. With term life insurance, the underwriting is completed before the policy is issued. If there are any issues regarding your eligibility, you will know before you even have to pay for any premiums. However, once the policy is issued and the premium paid, you can rest assured that your coverage is secure. This adds an extra layer of peace of mind that mortgage life insurance simply does not offer.


Term life insurance is one of the most affordable types of life insurance, making it a good choice for people on a budget. It is also one of the most straightforward types of life insurance, which can make it easier to understand and compare different policies. In addition, term life insurance can be a good choice for people who are not looking for lifelong coverage, such as those who are close to retirement age. term life insurance can provide peace of mind by knowing that your loved ones will be taken care of financially if you die prematurely.


I hope this article has been helpful in explaining the differences between term life insurance and mortgage protection insurance. If you have any questions, please let me know. I would also be happy to provide you with an instant quote so that you can find the best policy for your needs.

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A very costly mistake

By Pedro Diaz • 18 Jan, 2019
Have you named beneficiaries on your RRSPs? A very common mistake that can cost your family a lot of money is failing to name a beneficiary or improperly choosing a beneficiary on your RRSPs (Registered Retirement Savings Plans). What is a beneficiary? A beneficiary is any person or organization that receives assets from a person after that person’s death. Failing to name a beneficiary can cost your family thousands of dollars in taxes. Unfortunately, I have personally found that in many cases when people set up an RRSP account at a bank or through an employer plan (Group RRSP) companies automatically designate the Estate as the beneficiary, and this will commonly overlooked in the future. How are RRSPs taxed at death? The general rule is when a RRSP account holder dies, the entire market value of the account, on the day of the death, is taxed 100% as income for that year. For example John passed away in 2018. He year and had a RRSP with a market value of $350,000. The total taxable income for John’s estate for 2018 will be $350,000 (assuming he did not earn any other income) The tax payable in 2018 (Ontario and Federal combined) for $350,000 of income would be $149,359 Three exceptions to the rule There are three major exception in which John would be able to defer paying taxes on his RRSP balance if he named a beneficiary · A spouse · A financially dependent child under the age of 18 · A financially dependent child or grandchild with a mental or physical disability. In the example above, if John had overlooked naming his spouse as the beneficiary, his estate would owe the CRA $149,359 in income taxes and then it would have incurred additional probate and executor fees. However, because John names his spouse as the beneficiary, the spouse can roll the entire $350,000 into her RRSP without paying any tax to the CRA and avoiding probate fees. A simple mistake that is easy to overlook, could have cost John over $150,000 when probate fees are factored in. What to do if you're not sure? If you’re not sure who you named as your beneficiary, or if you named one at all, this RRSP season is the best time to review it.

“You can lead a hose to the water, but you cannot make him drink”

By Pedro Diaz • 23 Aug, 2018
Many times, I've been faced with this: HIM: "If something happens to my wife, I'll get $1M to take care of the mortgage and the kids" But when I ask, "well how about if something happens to you?" HIM: "Well, that's their problem" This is something I face every day as a financial advisor. You get to see the true colours of some people. Why should I have to convince you that you need life insurance? That is not my job. Life insurance is a tool that allows you to provide financial security for your family if one day you didn’t come home. Wanting to be able to provide for your family should be an innate value. It’s not something that I can convince you of. But I can help you find the best solution for your situation and budget. When $500,000 of protection for your family is only $17.37 a month for a 35-year-old, what’s really holding you back? I just don’t ever want to see you be GoFundMe Facebook post that I see every month struggling to collect $10,000 because “he left his family with nothing” If you want to learn how you can protect your family, you can get a quote here
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