Buying a home may be one of the largest financial commitments your family will ever make. You insure it against fire, theft and property damage. But what happens to the mortgage when your income suddenly stops?
Consider three events that could threaten your family's ability to remain in the home.
Would your spouse or family have enough money to continue the mortgage, maintain the household and meet other financial obligations?
If cancer, heart attack, stroke or another serious illness suddenly interrupted your income, would you have enough financial flexibility to concentrate on recovery rather than mortgage payments?
If an accident or illness prevented you from working for months or years, how long could your savings continue making the mortgage payment?
The house does not become less important because you become sick. In fact, that may be precisely when the security of your home matters most.
When arranging a mortgage, borrowers are often offered creditor insurance through the lending institution. It can be convenient — but convenience should not replace comparison.
The real question is: what protection will your family actually have when they need it?
With creditor mortgage insurance, the benefit generally goes to satisfy the insured debt with the lender. With individually owned life insurance, you normally choose the beneficiary — giving your family greater flexibility.
Instead of being required to use every dollar immediately against the mortgage, your beneficiary may have the ability, subject to the policy and their circumstances, to decide whether the money should:
Life insurance should protect the family's financial choices — not simply the lender's balance sheet.
Canadian homeowners change lenders for many reasons — a better rate, a refinance, debt consolidation, a new home. When insurance is personally owned rather than tied to one lender, protection can potentially remain in place even when the mortgage moves to another institution.
Your mortgage lender may change several times. Your health history travels with you.
Death may eliminate an income permanently. Critical illness can require a large amount of money quickly. Disability can slowly drain family savings month after month. A well-designed protection plan considers all three risks.
Creates immediate capital when a family loses an income earner — to reduce or eliminate the mortgage, replace lost income, protect children's financial security, pay debts and final expenses, and preserve the family's home and lifestyle. The appropriate amount should not automatically equal the mortgage balance.
Life insurance answers the financial problem created by death. But what happens when you survive a serious illness? Critical illness insurance provides a lump-sum benefit when the insured meets the policy definition of a covered condition and applicable survival requirements — financial breathing room during recovery.
For most working homeowners, the mortgage is really paid by your paycheque. Disability insurance can provide monthly income when sickness or injury prevents you from working, subject to the policy's definitions, waiting period and benefit provisions.
Instead of asking "How will we make the mortgage payment?" you can concentrate more fully on "How do I get better?"
This is where mortgage protection becomes financial planning rather than simply purchasing an insurance product. Imagine a family with a $500,000 mortgage — if one parent dies, paying the mortgage alone may not solve everything.
The surviving family may still need money for:
"What would your family actually need if your income stopped tomorrow?" Only then should we determine the amount and type of protection.
We believe those are two very different things. A lender naturally wants to protect the mortgage. Our responsibility is to help you protect the people living inside the home.
That begins by reviewing:
Those questions may be worth far more than a few dollars difference in premium.
Your home is where your children grow, where your family gathers, where memories accumulate — for many families it represents years of sacrifice, savings and hard work.
The objective is to make sure your family can keep it when life doesn't go according to plan.
We'll help you review your existing protection and explore whether your current plan adequately addresses life insurance, critical illness, disability and family income — no obligation, just a clearer understanding of what you have, what it protects, and where a potential gap may exist.
Request a Mortgage Protection ReviewInsurance contracts, creditor insurance and personally owned life, critical illness and disability policies differ by insurer and lender. Eligibility, underwriting, benefits, exclusions, definitions, waiting periods, premiums and portability are subject to the actual contract in force. Product-specific features should be confirmed using current insurer documentation before making a recommendation.