Life insuring your mortgage

Kelowna columnists write about the importance of getting insurance for your mortgage

This week we will go over the importance of purchasing life and disability insurance for your mortgage and the options available to you. A lot of homeowners are reluctant when it comes to purchasing life and disability insurance – they don’t want to add the cost of insurance to their mortgage payment.

One of the biggest mistakes you can make is when you sign your mortgage and decline the insurance thinking you will research it on your own. It’s not surprising that homeowners balk at mortgage insurance because most of us feel we are already stretching our monthly payments to the maximum. Think of it as you can’t afford to be without it. Your family could be left holding a debt on what tends to be a person’s largest individual financial obligation. It is especially important for first-time or young buyers to get coverage because the mortgage balance is usually high and the premiums in most cases tend to be much lower because of their age. The ideal time to look at your options is when you start your mortgage.

All lenders offer mortgage life insurance however getting insurance through an independent broker to cover your mortgage is usually a better option. This affords you the opportunity of switching lenders later on. As an example, five years down the road your mortgage becomes available for renewal and another lender is offering you a better rate. You can switch the mortgage and not have to re-qualify for your life insurance. This reduces the risk of facing higher premiums because as we age the premiums increase with new policies. Worse yet you may find out at the time that you are uninsurable. Mortgage Life Insurance with an independent will be for the full amount of the mortgage and not based on your declining mortgage balance. You do have the option of reducing your premiums when the mortgage balance decreases however when you are tied to a lender the insurance coverage is for the mortgage balance only and the premiums will remain the same regardless of the balance. If something were to happen to both you and your spouse with an independent the insurance would pay double. A lender insurance policy will pay your mortgage balance only.

Finally remember it isn’t just an untimely end that will cause a need for insurance to protect your family. You should as well consider disability and critical illness insurance in case you become unable to pay your mortgage due to serious illness or injury. A typical disability policy will only pay 60 to 70 per cent of your monthly income so there is still a gap. Coverage will be only for your mortgage payment with a lender however with an independent you have the option of insuring for a higher monthly amount so you will also be covered for other monthly expenses.

Of Prime Interest is a collaboration of mortgage professionals Trish Balaberde (250-470-8324) & Darwyn Sloat (250-718-4117) Christine Hawkins (250 -826-2001)

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