Do I need to protect my mortgage?

Most Canadian families own a home, which they consider to be their biggest asset. How can we ensure that our family will be able to stay in that home in case of a miss happening?

Canadians owe $2.06 trillion in household debt, according to the Bank of Canada, 2/3 of which is residential mortgage debt. There are various methods we can use to protect that mortgage – mortgage insurance offered through a bank, life insurance or critical illness insurance offered through various different insurance companies.

Mortgage Insurance pays off the remaining balance of your mortgage in case you were to pass away, have an accident or are affected by a terminal illness. With this insurance, the lender, in most cases the bank is the beneficiary, meaning the money goes to them directly. There are various drawbacks with mortgage insurance, one of them being that if you change mortgage providers or buy a new home which comes with a new mortgage, your insurance does not go with you. You also do not have the flexibility to change your coverage as your needs change. And as you pay off your mortgage, the benefit you receive decreases but the premium stays the same. When you are finished paying off your mortgage, you lose all the coverage.

When it comes to insurance on a personal level, you have the following options:

Term life insurance covers you for a set period of time — such as 10, 15, 20 or 30 years — and can be suitable for homeowners looking for low-cost insurance. While the premium may be low for the initial term, the cost will increase when the time comes to renew. Permanent life insurance can be more expensive initially, but provides coverage for life. Premiums can either be guaranteed or variable, depending on the type of plan you choose. Critical illness insurance provides you with a lump-sum payment you can use for medical expenses or to pay off your mortgage should you be diagnosed with a serious illness that’s covered under the policy. With life insurance you choose who you would like the beneficiary to be and critical illness is known to be living benefit, so you are the beneficiary. In case you transfer you mortgage or buy a new home, your life or critical illness insurance goes with you. Any term plan can be converted into a permanent plan later, according to your needs.  In either of these insurances, the coverage does not decrease over time, even if your mortgage goes down. Last but not least, you have complete control over the money, you choose when and where you will be using that money.

It is mandatory for you to have some sort of protection, whether it be mortgage, life or critical illness insurance, in place when buying a home.

If you are looking to buy a new home and have questions or concerns about which kind of insurance will best meet yours and your families needs, feel free to contact us at 416-241-2227 or email us at info@noblemortgages.ca to book an appointment with our extremely experienced mortgage broker.