Determining how much life insurance you need is the first step in assessing your overall mortgage insurance needs. Generally speaking you need enough to pay out your debts including your mortgage, and have enough left over to cover your kids expenses (including school) until they move out on their own. If you have a financially dependent partner then you will also need to have enough to assist them with their future needs.
Let’s assume that comes to $450,000 of which you have a $250,000 mortgage. Now if you were to obtain mortgage life insurance for the $250,000 then you would only need an additional $200,000 in term insurance to complete your insurance needs. Another way of fulfilling your insurance needs is to obtain $450,000 in term insurance and decline the creditor life insurance on your mortgage.
Generally speaking you are better-off shopping the market for term life insurance and declining the lender’s insurance. The term product gives you much more flexibility and is often the cheaper option. However, this is not always the case. Mortgage creditor life insurance is a group product which means it gives you a lower premium if your specific risk is higher than that of the entire group. An example of this is for smokers. Group plans often don’t discriminate against smokers, giving them a cheaper rate then if they applied for term insurance.
Bottom line is to compare your options and seek the advice of a trusted insurance broker.