Mortgage Insurance

In case you were faced with death or critical illness what would you rather lose...your home or your mortgage?

Buying a home is the biggest investment which most individuals make in their lifetime. Most of your savings are put as down payment for the home. On top there is a huge monthly mortgage payment. In case of untimely death of the home owner, it is practically impossible for the spouse to take care of growing kids alone and manage all expenses and huge mortgage payments single handedly. This leads to the possibility of a foreclosure by the lender which most of the times leads to depletion of one’s own equity since the right price buyer is hard to get in distress sales.

This financial jolt of home loss can be taken care by purchasing mortgage insurance. For mortgage insurance, you buy a term insurance equal to or greater than the mortgage amount. The insurance company pays the sum insured to your beneficiary upon your death so that they could pay off the mortgage.

The interesting thing in buying personal mortgage insurance is that the balance of your insurance does not keep on reducing as your mortgage gets paid off but remains fixed unlike bank mortgage insurance. Also you own your insurance yourself and name your beneficiary in the policy unlike bank mortgage insurance. This insurance is yours for the entire term and you don’t have to buy a new insurance each time you go to a new lender while renewing your mortgage. I have seen people who are stuck with the same lender at high rates because they have grown older and sick now and could not qualify for a new insurance if they changed lenders. If they had their own insurance from an insurance company, they would be free to shop for best mortgage rates upon mortgage renewal since their policy is good wherever they go. Also, a part or whole of the insurance is upgradable into a life term policy if and when you desire usually till age 65.

The most advantageous aspect of buying personal mortgage insurance is that you could buy a double coverage, covering both yourself and your spouse each individually for the mortgage amount. The cost is similar to a Joint-first to die policy but the benefit is that if both spouses pass away together, not only the home is free but there is money to take care of the kids too. This is huge and gives you added peace of mind.

I also recommend buying a disability insurance to cover your mortgage payments in case of long term illness or injury if you do not have sufficient coverage from work. A critical illness policy is another option that helps to pay off a part/ whole of your mortgage in case you were to get critically ill.

Insurance companies also offer bundled products combining life, critical and disability in one product specially to cover your mortgage protection needs.

The traditional diminishing insurance balance that reduces as your mortgage reduces is also available with few companies but I recommend level term insurance meaning where insurance balance stays constant throughout the term. This is because in Canada people buy new home after a few years and mortgage balance might still remain high after few years. If you purchased a level term insurance of little more than your mortgage amount, you don’t have to buy a new insurance if you were to buy a bigger home few years later.

I work with you to determine amount and term that would suit you according to your needs, age and budget. Flexibility is the key here. You get value for your dollar.