Should I Get Life Insurance on My Mortgage?

Medium size brown house with sold sign

When you get a mortgage, the bank will often ask you if you want to get mortgage life insurance as well.

What exactly is mortgage life insurance? 

Simply put, it’s a life insurance policy that will pay off your mortgage if you were to pass away before your mortgage is paid off in full.  For an extra cost each month (the amount varies based on a number of factors, including your age and health), you can rest assured that your dependents wouldn’t be stuck with mortgage payments should you die unexpectedly.  The bank adds the cost of the insurance to your regular monthly payment, and you’re off to the races.  How much more convenient can it get?  Sounds like a good idea, right?

Not so fast.  There’s always has a catch, as you should know by now.  In this case, it can be a fairly expensive catch.  Yes, life insurance is a good idea.  However, my personal opinion is that you shouldn’t buy it from the bank.  Why not?  This is why:

  • the mortgage insurance only pays out the balance of the mortgage owing
  • the cost of the mortgage insurance remains the same
  • you have no choice in what happens to the money
  • you are protecting the bank more than your family

What does this mean exactly?  Let’s say, for example, that you are paying $75 per month for $250,000 worth of life insurance on your mortgage.  As you pay down your mortgage, the balance owing is less and less each year.  After five years, maybe now you only owe $200,000.  Yet you’re still paying $75 per month.  After ten years, now you may only owe $150,000, but still your payment is $75 per month.  And so on.  Each month, you are getting less value for your $75 monthly payment.  For the purposes of this example, let’s say that you owe $150,000 at the time of your death.  Your life insurance will pay out that $150,000, but that’s it.  Yes, your mortgage is now paid out, but there is no extra money for your estate or your beneficiaries.  You have basically paid for $250,000 worth of life insurance, but you only utilized $150,000 of that insurance.  Is this really the best use of your insurance dollar?

So does this mean that you shouldn’t get a life insurance policy to pay out your mortgage if you die?  Absolutely not.

My suggestion to you is that rather than purchasing this insurance through a bank, you buy regular life insurance from an insurance broker.

Get a policy for $250,000 which is specifically earmarked to pay out your mortgage.  Your monthly payment will probably be very much the same as with the bank, but the benefit is that you will always have $250,000 in life insurance as long as you make your monthly payment (or until you reach a certain age, depending on the type of life insurance you get).  Plus you can designate a beneficiary for this policy.  So if you were to die and you owed $150,000 on your mortgage, your beneficiary can pay out the $150,000 owing on your mortgage and still have $100,000 left over. Or they can use the money to just pay a portion of the mortgage, or continue making the regular mortgage payments This is a much better scenario than the one I outlined above.

So when it comes to life insurance, make sure you ask questions and do your research. Talk to an insurance broker before you make your final decision.

Meena’s Note: Occasionally people won’t qualify for an individual life insurance policy that is large enough to cover your mortgage. And there is a bit of delay to get a life insurance policy set up. So I recommend taking the insurance provided by the bank, then talk to me right away about your other options. You can always cancel the bank’s policy later on, once your new policy is all confirmed.

The Gifts That Last a Lifetime

a wrapped present box with purple paper and white ribbon

We all know how it goes – kids get too many toys. They either quickly lose interest, or the toy breaks, or you have to declutter it to make room for more stuff. Whether you are buying for your children or grandchildren, you are probably looking for alternatives.

Experience gifts are a great option, but what about something longer lasting? What about something that gives both of you peace of mind, and protects them, their future spouse and children, even after you’re gone?

If this appeals to you, here are a few insurance gifts to consider:

Child Critical Illness Insurance (my favourite!)
It’s amazing value for your money. I explain it in more detail in this post.

Whole Life Insurance 
I know there is a lot of talk about how term insurance is the way to go, and I agree that in some situations having only term life insurance is fine.

However, when you are helping a young person get started in life, you just have no idea what will happen to them in the future. What kind of job will they get? Will they get married? Have kids? Will they have a medical problem and become uninsurable? 

That’s why I recommend getting a permanent insurance product in place as soon as you can. You can always chose to cancel later if that makes logical sense. But you can’t reverse time and easily get insurance for a good price after they have been diagnosed with a medical condition.

Plus a whole life policy has a cash value component. The recipient can borrow against this amount to help pay for school or start a business.

As a gift purchase, I recommend the option of picking a 20-pay policy. This means that you pay for 20 years only, and then the coverage continues for the child’s entire life.

If you can afford about $1 a day you may be able to get about $60,000 worth of life insurance. And you’ll only contribute about $8,000. It’s pretty amazing.

 

Are these options too expensive? You’re not ready to commit to 20 years of payments? Or you are gifting to a teenager or young adult?

What about a travel insurance policy?
Young people love to travel but often think they are invincible. Protect their future by paying for their travel insurance. For as little as $126 you can buy your 18 year old a worldwide annual policy.

I hope I have given you some new gift ideas. These are just a few of the many options to use your money and wisdom to protect the children and youth in your life. Do you want to discuss all the possibilities? Let’s talk!

 

Lifetime Illness Protection for Your Child

girl in a yard looking at a playhouse

Your baby is perfect. (Even if he isn’t a technically a baby anymore, you will always remember that adorable, tiny newborn.) You are grateful everyday for his good health. But you’re practical as well; you know illnesses can affect anyone at any time.

So you worry. You’re a parent; that’s part of the job.

I wish I could reduce that fear of the unknown. But I know I can’t. I’m practical as well. We insurance people know that we can’t prevent illness and injuries. 

However, what we can do is strive to ensure that when bad things happen, at least you will have more money to deal with them.

Money allows you to:

  • take time off work to care for a sick child
  • pay for meals or housecleaning
  • buy medicines that the provincial government doesn’t cover
  • take care of a myriad of other things

But what I’ve found when researching the insurance companies I represent is that there are very few products available for children. Almost all products are for adults, who can make their own decisions. Adults have the right to decide how they spend their money and how they will deal with life’s difficulties.

Your child doesn’t have that choice. They only have you.

That’s why I was thrilled when i found out about Desjardins Insurance‘s child critical illness policy, Health Priorities – Child. 

Of course as an insurance broker I’m a fan of insurance. But not all insurance companies or policies. I’m careful to only recommend what is suitable and beneficial in your situation.

But when I heard about this policy I thought, Wow! Who wouldn’t get this?

Here’s how it works:

You pay a certain amount every month or year for twenty years, and then your child or grandchild (or niece, nephew, or godchild) has coverage for the rest of their lives.

Not to 65 or 75; but to 90, 102, 112! Whatever age they end up living to, they will have coverage for serious illnesses, such as malignant cancer, heart attack, stroke, multiple sclerosis, and many other conditions. 

I know you are wondering about price. Like any insurance, you pay more for more coverage. But let’s start with an amount that any anyone can afford:

For just over $1 a day*, you get can $30,000 in coverage. Now you are probably thinking that you’re just paying that $30,000 over time. However, if you do the math you’ll find that over those 20 years you are only paying about $8,000!

Couldn’t you just invest your money?

Absolutely! Investing for your loved ones is an excellent idea. Let’s say you put aside the same $1 per day and earned 5% interest. When would you have $30,000? After about 30 years. You would have spent about $12,000 of your own money.

If you can predict that your child will be perfectly healthy for at least 30 years, and you will always be able to put that money aside every month, year after year, that’s great. But if you are like me, your future prediction skills just aren’t that accurate.

But if you have an eligible claim, then you will receive $30,000 in that first year, even if you’ve only paid $100 so far. 

Sounds good so far, doesn’t it?

Well, it gets even better. Let’s say your daughter stays healthy, and either gets her own new policy, inherits some money, gets a great job, or otherwise doesn’t need the insurance any more. After twenty years you can cancel the policy and get all your premiums back, as long as a claim has never been paid.

I don’t recommend cancelling, but at least you know you have that option.

And what is the risk to not getting this coverage in place as soon as possible?

If your child develops an illness, or even signs that may indicate
an illness,  insurance becomes more expensive or even
impossible to get.

But if you get coverage in place now, she will have lifetime coverage to protect herself, her spouse, and future children.

Interested? Fill out this short survey and I’ll contact you with a quote.

Here’s a brochure with information on Health Priorities – Child product.

*Example only. Your price will vary depending on age of child and potentially other factors.

Disclaimer: Your Life Money Coaching Inc. provides financial education, but does NOT sell insurance. However, Meena Kestirke, the owner of Your Life Money Coaching is a licensed insurance broker in Alberta. 

Is Your Travel Insurance Policy Any Good?

airplane in blue sky

You probably purchase emergency medical travel insurance policies without giving them much thought. They are easy to buy, often online with minimal questions, or as an add-on to your credit card or employer group benefits coverage. But in a worst-case scenario are you as protected as you thought?

I recommend purchasing an individual travel insurance policy, as the coverage is typically much better than as an add-on to something else.

But at the minimum, it’s extremely important to read your policy wordings well before your travel date, to see where problems might arise. Although having a large claim isn’t likely, do you really want to find out something isn’t covered after you’ve had a quarter million dollars’ worth of treatment?

I know that those booklets are long and boring though. So here are some particular items to watch for in analyzing your travel coverage:

  • What is the maximum days of coverage? Is it long enough for your trip?
  • Can you pick your number of travel days and pay accordingly?
  • What is the maximum coverage?
  • Can you pick your deductible?
    If you can cover $1,000 or more yourself, and only need coverage for the most severe emergencies, you can save a lot of money if you can pick different deductibles.
  • Are pre-existing conditions covered? If so, under what conditions?
  • Can you get coverage for any drugs that you were previously prescribed?
  • What is the age limit of coverage?
  • Can you choose between a single trip and an annual plan?
    Often, if you travel at least twice a year, an annual policy is cheaper. But if you are just going cross-border shopping for 48 hours a single trip policy is great.
  • Are you expected to call the claims department before seeking treatment?
  • Do diagnostic tests such as ultrasounds and MRIs need prior approval in all situations?
  • Do you need preapproval for therapies, such as physio, or items such as crutches?
  • If it applies to you, are your grand-children covered under a family plan?
  • Does coverage stop if you return to your home province? Even if it is just for temporary emergency?
  • What are the limits for dental coverage?
  • Is there any coverage for risky or extreme sports?
  • Under the coverage for transporting a family member to where you are, what is the per day expenses limit? Is it enough to even pay for a hotel?
  • Under the vehicle return benefit, what is the limit?
  • Does your plan offer options such as:
    • Trip cancellation/interruption
    • Rental car coverage
    • Accidental death & dismemberment
    • Baggage coverage
  • Of the above, can you pick your combination or is it bundled together with no options?
  • Does rental car coverage depend on you using that credit card to pay for the car?
  • What type of vehicles are covered?

Do you have any questions about your travel insurance policy wordings? Make sure to call your broker or their service line before you travel.

I’ve decided to partner with TuGo, for my travel insurance sales. I believe they have the best coverage and the most options for any budget and situation. If you’d like to know more, or for a comparison between them and your current plan, please contact me