Protect your home, not your lender.
Getting personally owned life insurance to cover the mortgage debt versus the lender’s coverage is about being in control. With mortgage life insurance your lender owns the policy. If you find a better mortgage rate at another lending institution you would have to re-qualify for the protection as it cannot be moved to another institution. With mortgage insurance your lender pays off the mortgage automatically at claim. Your beneficiary has no choice in how to use the funds. Mortgage insurance offered by lenders decreases as you pay down your mortgage but the premiums remain the same.
With personally owned insurance, you own the policy, not your lender. You have the freedom to switch your mortgage to another lender without jeopardizing your insurance. Your beneficiaries can choose how to use the funds (ie: payoff the mortgage, provide an income, etc) it’s their choice, not the lenders. The insurance protection remains level. Another significant benefit is that the premiums on a personally owned plan are most times lower than the lender’s plan.
Alarmingly, many of the lender insurance products are "underwritten" at time of claim. This means the lender's insurance company looks at one's physical and mental health at the time of claim when it is needed the most. This could put the claiment or their estate at serious financial risk if the underlying insurance company refuses to pay the claim. With personally owned insurance, this risk is avoided as the insurance company underwrites an individual at the time of applicaition.