Owning your own home is a very big deal - because it's likely the biggest financial decision you'll ever make. That is why mortgage insurance should be a big deal, too. It's a vital financial safety net that will protect your home no matter what happens - and, sadly, something could:
- In Canada, each year, 1 in 106 people die, 1 in 88 homes catch fire, 1 in 70 motor vehicles are involved in an accident that causes injury or death - and 1 in 8 Canadians will become disabled.
- Bank of Canada statistics tell us that 4% of mortgage foreclosures are caused by the death of the major breadwinner - and 48% are caused by a disability.
If you can't go to work tomorrow, where will the money come from to protect your family and your home? The answer could be mortgage insurance - but what type is best for you?
Traditional mortgage insurance
- Available from your lender and the premium is simply added to your monthly mortgage payment. But it may not the best option because:
o Your premiums can often be raised or the policy cancelled at any time.
o The lender owns the policy so if you want to move to another lender for a better rate or move to a new home, you may have to re-qualify medically for new protection, possibly at much higher premiums.
o The lender is the beneficiary, not your family.
o The cost of coverage may increase over time even though your mortgage is paid down - meaning you're paying more for less coverage.
o Your coverage ends when the mortgage is paid off - you can not keep it for other purposes.
o Underwriting is done at claim time, so you are never sure whether you are covered until it's needed.
Personal life insurance
- You own the policy - it insures you not the mortgage.
- You designate your beneficiaries who get the funds directly and can use them as they wish.
- Your coverage does not reduce with your mortgage, unless you want it to.
- Your premiums are guaranteed based on the plan you choose.
- Your coverage isn't tied to your home - take it with you when you move or arrange a new mortgage.
- The underwriting is completed up front so you know your coverage is in force.
The case for mortgage insurance is clear - you need it, you should have it. Your professional advisor can help you get protection tailored to you.
*1985 Commissioner's Disability Table A (experience table), CIA 86-92 Aggregate Mortality Table
This column, written and published by Investors Group Financial Services Inc. (in Quebec - a Financial Services Firm), and Investors Group Securities Inc. (in Quebec, a firm in Financial Planning) presents general information November 18, 2013 only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.Steve Bovair, Consultant - Investors Group391 1 St #102,
Collingwood ON L9Y 1B3