You thought you were finished signing the papers, but suddenly you are handed an insurance application asking you to confirm you are healthy and offering to pay off your mortgage in the case of your death. And if you're like most people, you sign it and think nothing of the cost as the quote is a low weekly or monthly figure. For most people that's a mistake, as they don't realize that a personal mortgage life insurance policy can cost a lot less and offer you a lot more.

But What Does "Mortgage Life Insurance" Mean?

Mortgage life insurance you purchase through your bank is a group policy between two parties - the bank and an insurance company. You, in any way, are not a party to this contract. That means that the benefits you get as a member of the group - like having your mortgage paid off if you die - end the moment you stop being a member of the group, i.e. you stop paying or if you move your mortgage.

A personal mortgage life insurance policy is yours regardless of which bank or lender your mortgage is with. Mortgage brokers offer mortgage life insurance to clients but often encourage them to look into getting personal insurance instead.

Why Personal Mortgage Life Insurance?

People who buy houses should be looking for quotes from independent insurance agents. With mortgage life insurance from a bank you're insuring a declining balance for the same premium. Private insurance isn't like that; it remains level

Buyers should have some coverage for all debt as first-time buyers, who tend to be younger, and with larger purchases, are significantly increasing their debt load. Should the unforeseen happen, their family may have no choice but to lose the home.

And there's more. While you may make extra payments to be pay off your mortgage early, your life insurance with your lender is fixed as we mentioned above.

And that's even before you take the control and flexibility available from personal insurance into account. The bank says is that it will pay off your mortgage if you die, but without a new mortgage, it won't lend your family any money.

The bank is the beneficiary, and even if the family might need the money for something else they aren't able to remortgage the home because they aren't the beneficiaries.

How Much Mortgage Life Insurance Do You Need?

Your first step should be to determine if you even need any more insurance than what you already have.

People need to see their insurance needs as a whole, rather than a bunch of problems; you don't want to end up with too much or too little.

You may also find that you want enough life insurance to cover other potential expenses in the case of your death. Mortgage Life Insurance through your life insurance company is really life insurance in an amount sufficient to cover your mortgage. In addition you can purchase more life coverage to include education and debt. And you can decide who will be your beneficiaries, which is not the case with bank mortgage life insurance.