Mortgage Insurance

Mortgage Insurance Take Two

In my last column I talked about buying home insurance as part of the home buying process. Another conversation I have with clients as part of their mortgage application is around life and disability insurance protection for their mortgage.

We have to offer the coverage. It is optional for clients to purchase.

Many clients choose to waive the coverage because they feel they are well covered with programs at work. For some people this is the case; for others not as much. I think most people truly don’t understand how much they are covered for, and how long the coverage lasts.

Not a big deal unless you are hurt badly enough to need the disability, or worse yet something horrible happens that one of the mortgage holders passes away.

I’ve had conversations with spouses that were left behind without adequate insurance in place. Its heartbreaking.

I’ve had conversations with clients that were injured on the job and are battling with Worksafe for coverage.

What really made me start thinking about the importance of this was a conversation with one of my favorite people a few days ago. He had a rather unfortunate unplanned sudden stop on the ski hill. Last run of the day, last ski day before a tropical holiday that had been booked for months.

After a four hour surgery to rebuild his leg, three days in the hospital to try to get his pain under control, and its looking like about five months off of work for the healing and rehab and he is already bored looking at his walls.

He works as a first class power engineer so makes big money. He has always been careful with his income so has a decent nest egg to get him through. He had always figured that his disability coverage at work would have been more than adequate to live on if anything happened.

He has discovered that after a relatively short time frame his disability coverage drops to 2/3 of his salary (in another two weeks). That in itself would still be ok, but at the beginning of each year his deductions for EI, CPP, and Income Tax are almost half his cheque. Year to date his income was already on the low side of what he’s used to.

His expenses are up a bit as he is having to cab to all of his appointments (no driving for a while) and he has had to rely on take out as he can’t stand for long to cook. He has a dog sitter coming in to help as he has trouble getting up and down the stairs still.

These don’t seem like big things but they are starting to add up.

Of course he had declined the life and disability insurance when he bought his home. He is young and fit and well covered at work.

Had he opted to buy the disability coverage, he would have had a sixty-day waiting period and then the coverage would have kicked in to cover his mortgage payment and property tax payments. The coverage would also make an extra payment after he went back to work to provide a buffer while he waited for his first full paycheque.

Life hands us curve balls. No one likes to consider the ugly “what ifs” while they are in the throes of buying a home. Carefully considering what your financial picture will look like if one or the other of you is unable to work is important.

Not all policies are created equal, so it is important to consider your options.

Our firm offers Mortgage Protection Plan through Manulife. The coverage is portable from lender to lender in the event that you switch your mortgage and can be ported from one home to the next. Some policies only cover the home and mortgage from the time you first purchase your home, so if you make any changes you have to requalify based on your current age.

The first sixty days of coverage are free which gives you time to research your options while still having coverage in place.

I was not a huge supporter of life and disability coverage until about five years ago when one of my clients had a horrible accident the day after he signed his insurance application. He was lucky in that he survived the crash, and very grateful that he had opted to purchase the coverage.

He was off work for over a year. Although there was help through ICBC, it was a long haul for the family. This coverage saved their bacon.

The pros and cons of various types of coverage is a long conversation. I am not an insurance professional so often direct my clients to speak to their financial planners to research the best coverage for their situation.

The best type of coverage is truly some coverage. Any coverage. Have something in place to protect you and your family in case something unexpected jumps out at you on the ski hill.

    For an easy reference here are 3 great downloadable handouts from Manulife:

    DISABILITY MORTGAGE INSURANCE

    MORTGAGE INSURANCE OVERVIEW 

    MORTGAGE PROTECTION INSURANCE 

      

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