There are many answers to this question. Each individual case is different as is the type of insurance. Let’s look at 2 of the most common insurance plans.
- Mortgage Life Insurance – Mortgage life insurance covers the mortgage payments that are outstanding. This insurance will pay down or pay off the remaining mortgage should you die. The value of the payout is dependent on the amount remaining and the amount of insurance you purchase. This policy ends once your mortgage is paid off.
- Personal Life Insurance – A personal insurance plan defines a specific dollar value. If you die, the dollar value per the terms of your policy is paid out to your beneficiary. They then decide how to use the money. Personal life insurance can be purchased for a specific term.
It is not mandatory to purchase either policies. The decision to do so is an individual choice.
Often, mortgage life insurance is confused with Mortgage Default Insurance. Mortgage default insurance is mandatory in Canada for down payments of less than 20% of the purchase price.
The topic of insurance can be confusing. Feel free to contact me to explain in more detail so you can make the best decision.