A mortgage is usually the biggest, single debt any Canadian will ever take on.
That’s enough to make anybody nervous and it’s why most of us seek the protection of mortgage insurance to make sure our home will always be there for our family come what may. And it is the right and prudent thing to do. What isn’t always the best solution is assuming that mortgage life insurance is the only option for this protection.
Sure, it’s easy to do as mortgage life insurance is typically offered as part of your lender’s mortgage package and the cost of coverage is simply folded into your monthly mortgage payment. But that may not be the best option for you. Here’s why:
When you get mortgage insurance from your lender …
• The lender is the beneficiary of the policy. There are no cash values and coverage expires when the mortgage is paid off.
• Coverage decreases as the mortgage is paid down but your premiums remain the same or increase over the term of the mortgage.
• The lender’s policies may allow them to adjust your premiums or even change or cancel the policy at any time.
• If you decide to move your mortgage to another lending institution for a better rate, it is likely your existing mortgage life insurance may not be moved.
• The mortgage insurance is not customized to your situation, and may not provide the right type of insurance coverage for your needs.
When you use a personal insurance plan to cover mortgage debt …
• You own the policy and your designated beneficiaries can choose how to use the funds to pay off the mortgage, provide a monthly income, or take care of immediate needs.
• Your coverage doesn’t decline with your mortgage balance. Coverage continues after the mortgage is paid, protecting your beneficiaries for the life of the plan.
• You, and only you, can cancel or make changes to your personal plan. And premiums are guaranteed for the life of the plan.
• Move to another home, move to another mortgage, and your personal insurance plan goes with you.
• Your premium is based on you, your age, health and smoking status.
• Your policy is designed for you by an expert consultant to be exactly what you need, with premiums that suit your budget. Mortgage protection is the right and prudent thing to do, but be sure it protects you and not the lender. Your professional advisor can help you choose protection that works for you and integrates seamlessly with your overall financial plan.
This column, written by Investors Group Financial Services Inc., and Investors Group Securities Inc. presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances.