Advantages of owning your mortgage life insurance coverage
You get to keep the life insurance plan should you decide to refinance a loan or change lending institution.
The benefits and prices are guaranteed for the duration of the predetermined term of your choosing, for example 25 years.
The policy owners (the insured) can request an amendment or terminate the coverage at their convenience.
How do insurers determine cost
Most banks charge a fixed premium during your loan repayment period. You pay a fixed premium even though the loan amount decreases. The bank insures the loan balance therefore the insurance becomes more expensive as you pay down your loan.
Desjardins, calculates the premium as a percentage of the loan balance. The additional rate of interest is then added to the interest you pay on the loan. When you renegotiate your loan, you will also need to renegotiate the terms of insurance. Premiums generally increase substantially during the mortgage reimbursement schedule.
Term insurance provides the most cost-efficient solution. The insured pick a predetermined term of their choice. The premium and amount insured remain fixed throughout the duration of the mortgage. The life insurance provides more value for your money. Should you decide to reduce the sum insured over time the premiums will be reduces accordingly.