Mortgage vs Life insurance

I made the mistake of answering my phone at dinner time yesterday. "Mr. Chaudhry we're hoping to give you a 10 minute presentation on your life insurance needs." Yeah that's exactly what I need at 5:30 in the afternoon. Anyways, I often get asked by clients, what the difference between life and mortgage insurance is, and which product they should be subscribing to. Here's a few points about each to help you understand the difference.

Mortgage insurance
- Your insurance covers only your mortgage balance.
- Even though your mortgage debt reduces over time, your premiums remain level.
- If you die, only the outstanding balance on your mortgage is paid off.
- The mortgage lender is automatically the beneficiary.
- If you take your mortgage to another company, you may lose your existing mortgage insurance and may be required to re-qualify for new mortgage insurance.
- You lose all your coverage when your mortgage is repaid, assumed or in default.
- You have no flexibility to change your coverage as your needs change.

Life insurance
- You can choose from different types of insurance (i.e. term or permanent) with a death benefit to cover more than just your mortgage.
- Your coverage amount does not decrease over time unless you choose to change it.
- If you die, the death benefit is paid to your beneficiary who can use it as they see fit, not just to pay off your mortgage.
- You name the beneficiary.
- If you take your mortgage to another company you keep your existing insurance, so you don't have to re-qualify.
- As long as premiums are paid your coverage remains in place, even if your mortgage is repaid, assumed or in default.
- If you decide you need coverage only until your mortgage is repaid but later realize you require coverage for other needs, you can convert your insurance to a permanent plan.