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The Advantages and Benefits of Insuring Your Mortgage
Your home is probably the largest single investment you will make in your lifetime. If you’re like most Canadian home-owners, paying a mortgage will be a regular household expense that you will have to budget for; so taking steps to insure it’s value – through loss by fire for example – will probably be one of your first concerns.
But what happens to the family’s home when you are no longer there to make the mortgage payments or pay the insurance premiums. It’s a problem that most families don’t consider until it’s too late, and the consequences can be tragic.
Life insuring your mortgage should be your first priority, since the possibility of death is more than 1000 times greater than fire. Banks or Trust Companies have plans available, called ‘Lender’s Group Mortgage Insurance’, but ‘Your Own Personal Policy’ can cover all your needs with a plan known as “Personal Mortgage Insurance.”
What’s the difference? In the first case, the Bank or Trust Company would have control over your plan, but with ‘Your Own Personal Policy’ control of the plan remains with you.
With a Bank, Credit Union, or Trust Company.*
- You are covered under a group policy owned by the bank.
- Because the Bank owns the policy, you have no control over the policy.
- The features and provisions of the group policy are the same for everyone insured under it. Only the face amount will vary.
- The face amount of your policy can only be for the face amount of your mortgage (no more, no less).
- The group coverage is always decreasing term insurance, declining as the mortgage declines.
- The group policy can be cancelled by the bank or the issuing company at any time.
- Group coverage will terminate upon the happening of any of the following events:
- The mortgage is repaid
- The mortgage is assumed
- The house is sold
- The insured person ceases to occupy the house (i.e. if you rent your home)
- The mortgage is in default
- The group policy terminates
- Group mortgage insurance is not convertible.
- Group mortgage insurance does not allow you to make beneficiary designations or to select settlement options. In the event of death the bank is repaid automatically.
- Group coverage whereby both the husband and wife are covered only pays on the death of one of the insured – not both. The overage on the survivor terminates. It cannot be continued.
- With group coverage there never are any cash values accumulated.
- No other benefits or features may be added to your group policy by you.
- When you insure through the group policy offered by the bank you are not given the benefit of professional counselling. Your bank loans officer is not a licensed life insurance agent. They may not be well informed on various types of coverage available.
- If you miss your mortgage payment your insurance tops.
* Some group policies at banks may differ from policy material descried.
Your Own Personal Policy
You purchase an individual personal policy owned by you.
Because you own the policy you have complete control over it.
With a personal individual policy you may select the type of plan you wish, the features and provisions you require. The choice is yours.
You may purchase any amount of coverage you require.
You may purchase any kind of insurance; either permanent or term insurance, level insurance or decreasing.
An individual policy cannot be cancelled unless you wish to cancel it yourself.
Your individual policy may be continued as long as you wish. It is a portable plan that can be used to cover any mortgage anywhere. (Statistics Canada report the average Canadian family moves once every five years.) This is a very important feature if you become uninsurable at any time.
An individual term policy can be converted, regardless of health, usually until age 65.
An individual personal policy allows the owner to make beneficiary designations. The owner or beneficiary may select any of the several settlement options. In the event of death, your beneficiary will receive the proceeds from your policy. Your beneficiary can have the choice of repaying the mortgage or not, thus preventing hasty decisions. Proceeds are protected from creditors.
SPEAK WITH YOUR ADVISOR
For a thorough evaluation of your insurance needs, please speak with our advisor.