Welcome to THE FINE PRINT, where we shine a light on the tiny text at the bottom of mortgage insurance policies. Our caveat-free advice: if you're deciding between mortgage insurance and life insurance, life insurance wins—every time.
On paper, mortgage insurance and life insurance seem similar. Both are meant to protect your loved ones if you die. But here's the difference: life insurance gives your beneficiaries the freedom to use the payout in whatever way they need most — from covering the mortgage to paying tuition, tackling debt, or simply keeping day-to-day life on track. And it usually does so at a lower cost and with fewer strings attached.
Mortgage insurance, by contrast, is sold mainly through banks and comes with big catches. The payout goes straight to the bank — not your family. Once your mortgage is paid off or if you default, your coverage disappears. To top it off, mortgage insurance premiums are often higher, less flexible, and rarely reflect your individual health or age.
A side-by-side comparison in 125 words or less.
| MORTGAGE INSURANCE | LIFE INSURANCE | |
|---|---|---|
| Who owns the policy? | The bank. | You do. |
| Who decides how much coverage you need? | The bank decides. | You decide. |
| How does your coverage change over time? | As you pay off your mortgage, your coverage shrinks—but your premiums stay the same. | It remains steady. |
| Does your age, health, or smoking status affect your rates? | Mortgage insurance is one-size-fits-all. | Generally, the healthiest clients pay the lowest rates. |
| Who is the beneficiary of your policy? | The bank. | Anyone you choose. |
| What can the benefit be used for? | For one thing only: to pay your mortgage. | For anything: to repay debts, pay for education, invest in your family's future, and even—yes—to pay your mortgage. |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
