When my clients are looking for mortgage term insurance for housing insurance coverage, I usually recommend level term insurance.
In my opinion, this is the best choice.
There are 3 reasons why I prefer level term insurance.
1. Level term insurance locks in the premium of the life assured at entry age, and also gives level coverage throughout the term.
And nowadays, insurers make it affordable and offer cheap premiums for high and level coverage (Around $1 million sum assured and above.)
This is why it makes far more sense to have 1 policy each, under 2 different names.
For example, you could have one each for you and your spouse.
A client of mine recently asked for a quote for him and his wife for a mortgage term insurance coverage of about $1,000,000 sum assured JOINT coverage.
I made a comparison between…
- Sum assured $1,000,000 for him and his wife under the same plan based on a decreasing (Mortgage-reducing) term insurance.
- Sum assured $1,000,000 for himself and $1,000,000 for his wife on level term insurance each.
The premiums for level term insurance are only slightly more than the decreasing mortgage term insurance joint plan.
For plan A, the joint term insurance, the coverage decreases according to the loan amount.
If one policy holder passes away, the plan ceases and the other (For example, your spouse) will no longer be covered anymore.
However, when it comes to plan B, the level term insurance, for each policy holder, the coverage of $1,000,000 is for each policy holder.
And even if one person dies, the other will not be affected or lose coverage.
Hence you get double the coverage for plan B.
And this is while paying the exact same premium!
What you should also know is that a mortgage reducing or decreasing term insurance will reduce the coverage according to the remaining loan amount each year.
(But the premiums usually remain constant throughout the contract.)
If you want to save money while enjoying double the coverage, consider level term insurance.
2. If you compare this to the HPS, your HPS cover will be terminated if you sell your flat, or redeem your loan earlier.
Similarly, if you buy a new flat or upgrade, the HPS cover for your old flat will be terminated.
Ultimately, buying new HPS insurance may be more expensive depending on your age. Plus it’s subject to underwriting.
And if you’ve already gotten level term insurance (Or decreasing term insurance) it ensures consistent and sufficient coverage.
3. Over time your liabilities will increase (For example, if you add new dependents or your income rises.)
And if you have decreasing term insurance, your coverage will drop due to the remaining mortgage loan which your liabilities increase.
This is why it makes more sense to have level term insurance, which can cover you for the right amount.
Unless you have other existing policies which are seem sufficient for the additional liabilities (Other than mortgage loans) then you should consider decreasing term insurance.
Note this is only my opinion, and it’s always a good idea to look at all your insurance policies holistically before getting any type of insurance. If you need help, contact me now!