Bringing Your Financial Security Plan Home

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article contributed by

David Whelan

Consultant at Investors Group Financial Services Inc.

Extensive experience in Life & Critical Illness Insurance, Financial Planning and Planning for Small Business Owners.

Whether your current home is your first home or your dream home, the most important fact is it’s your home. At least, it is your home for as long as you continue to pay your mortgage. That’s why you maintain your budget carefully and make the mortgage payments each month. However, what if you no longer could make those payments? What if unforeseen illness, injury or death made it impossible to maintain the mortgage payments? Would you and your family be able to stay in their home? Luckily, there are ways to ensure your family will always have a roof over their head, regardless of what circumstances you face. However, how do you determine what is best suited for your situation? Here we will outline your options.

Traditional Mortgage Insurance

Mortgage insurance will pay off the total outstanding balance of your mortgage when you die. Most lending institutions offer mortgage insurance as part of their mortgage options and will most likely incorporate the premiums into your total mortgage payments. Conversely, this type of insurance often does more to protect the interests of the lender than your own.

First off, your lender owns the policy and if you find a better mortgage rate at another lending institution, your mortgage insurance usually cannot be transferred to the new institution, and you may have to prove insurability again for the new protection. Lender provided mortgage insurance begins at the amount of your mortgage and normally decreases as you pay off your mortgage— so you end up paying the same premium for a smaller amount of coverage. Should anything happen to you, the death benefit is payable to the lender as a beneficiary, not your family. Moreover, insurance renewal rates are not guaranteed.

A Personal Life Insurance Policy

A personal life insurance policy works to insure you, not your mortgage. You determine the amount of coverage you desire — it’s not tied to the value of your mortgage. You are the policy-owner, so you have the freedom to name your beneficiaries and they can choose how to allocate and use the benefit. You can switch your policy to another lending institution without jeopardizing your coverage and your coverage does not decrease as your mortgage is paid down. This means that for every dollar of mortgage principal repaid, there will be additional proceeds available to your family at a time when they may need it the most. Furthermore, your policy is customizable with the options and features you wish to include, which may include the waiving of your premiums if you become disabled.

Disability Insurance

Disability Insurance protects your ability to continue to make mortgage payments by providing money if you are unable to work. You may have a group plan at your workplace that includes disability insurance. But, group coverage ceases when you leave your job and if you are self-employed you may not have a plan. A group plan may also have strict limits on payouts and may very narrowly define the term “disability” which could require you to surrender payments or return to work prematurely. A personal disability plan can supplement other disability benefits in ways that make sense for you.

Critical Illness Insurance

Critical Illness Insurance generally pays you a one-time lump sum benefit amount if you are diagnosed with a critical illness or condition as defined in your policy. Critical illness insurance is not tied to your mortgage amount or any other personal or business loan. You ordinarily can use the benefit to help pay off your outstanding mortgage loan, make payments while you recover, or for any other personal or business need as you wish.

Summary

If you want to ensure that your home remains a secure haven regardless of what happens to you, having the right amount of insurance to cover your mortgage debt is crucial. If you want to be able to maintain your family’s lifestyle no matter what may happen, disability and critical illness insurance are equally important. We can show you how insurance can play an important role in applying your financial security plan to your home. If you have any questions, feel free to contact me directly at (416) 860-1668, or visit my profile HERE.

Author: David Whelan