Of Prime Interest: Consider varied insurance options for mortgage payments

Mortgage insurance is something you can’t afford to be without it.

Many homeowners are reluctant when it comes to purchasing life and disability insurance—they don’t want to add the cost of insurance to their mortgage payment.

But one of the biggest mistakes you can make is to sign off on a mortgage deal and decline the insurance coverage, thinking maybe at some point you will research it on your own.

It’s not surprising that homeowners might balk at mortgage insurance because it’s an added cost to the monthly payment .

But think of it instead as something you can’t afford to be without it. Otherwise, your family could be left holding a debt on what tends to be a person’s largest individual debt obligation.

It is especially important for first-time or young buyers to get coverage because the mortgage balance is usually high and the premiums in most cases tend to be much lower because of their age.

While all lenders offer mortgage life insurance, another option is to acquire insurance coverage though an independent mortgage broker.

This affords you the opportunity of switching lenders later on.

For instance, five years down the road your mortgage becomes available for renewal and another lender is offering you a better rate.

You can switch the mortgage and not have to requalify for your life insurance. This reduces the risk of facing higher premiums, for as we age the premiums increase with new policies.

Worse yet, you may find out at the time that you are uninsurable.

Mortgage life insurance with an independent broker will be for the full amount of the mortgage and not based on your declining mortgage balance.

You do have the option of reducing your premiums when the mortgage balance decreases.

If you are tied to the insurance offered by most lenders, the mortgage balance will decrease but he insurance premium will remain the same.

If something were to happen to both you and your spouse, with an independent insurance package it would pay double, not just your mortgage balance which is the case when insuring with the lender.

A typical disability policy will only pay 60 to 70 per cent of your monthly income, so there is still a gap.

Disability coverage will be only for your mortgage payment with a lender, while independent insurance options could include a higher monthly amount to allow for greater monthly expense coverage for property taxes or basic living expenses.

There are plenty of options out there for mortgage insurance, so do your homework before signing on the dotted line.