We have all been there...you have just bought your new home and are at your lenders desk signing the paper work when they ask "Would you like to purchase life insurance to cover your mortgage?" At first glance it looks like a great idea, we all want to ensure that our family is taken care of should something happen to us and its quick and easy to get. Just answer a couple easy questions and it's yours.
However, if you happened to watch an episode of CBC Market Watch titled "In Denial" you will know that this type of mortgage protection may not give you any coverage at all. In the Marketplace investigation, they interviewed two families who bought coverage and thought they were protected, only to have their claims denied when they became sick or died.
So why is it that Mortgage/Creditor Insurance may not provide coverage but typical Life coverage purchased through a licensed Advisor will? One big difference is that with most mortgage/creditor policies the your application is not reviewed and accepted until after you pass away. Whereas, most policies purchased through a licensed agent are approved or declined upon application. Therefore, unless you made a fraudulent statement about your health, coverage is guaranteed when you receive the policy.
There are a number of other differences between mortgage/creditor coverage and life insurance. Here are just four further examples:
1) Often the amount of coverage with creditor insurance decreases every year however the monthly payment stays the same. Whereas the amount of coverage with life insurance does not decrease.
2) Creditor policies terminate when the loan that it is attached to is paid off. In the case of a mortgage this could happen any time you re-finance or move. Life policies terminates when you want it to.
3) With a mortgage/creditor policy you have no say in what the insurance proceeds are used for. With a Life policy the beneficiary gets to decided what the proceeds would be best used for.
4) Coverage purchased through a licensed advisor is in a lot of cases is CHEAPER and provides better coverage then creditor policies.
Now here's the good news. In almost all cases if you have mortgage insurance you are able to cancel it at any time without penalty. To determine if your present coverage fits your needs and for a free no-obligation quote please contact me. Further, on a regular basis I see individuals that have proper coverage but are paying way too much. If you have not recently received competitive quotes on your policy please give me a call.
Kevin Schroeder is an Insurance and Investment Funds Advisor with Money Concepts (Chilliwack) IA Investia (Mutual Fund Dealer).
Kevin's objective is to provide Insurance and Investment Fund products in a manner clearly different and superior to what is currently available to consumers in the area.
He believes that each client is unique and therefore approaches investment and insurance planning according to your individual needs and comfort level. He prides himself around developing a solid long-term working relationship with his clients. He achieves this through scheduled face to face review meetings, excellent communication and service from his staff.
Kevin has studied many areas of Financial Planning, from cash flow management to estate planning. He has a special interest in wealth creation strategies, many of which have a tax reduction component. Most people pay far more tax than necessary. He also strongly believes that later in life preservation of capital is paramount, and manages assets according to these principles.
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