Is Insurance Really that Important?
When it comes to the long list of important things you have to think about when buying a new home, insurance for your mortgage is likely nowhere near the top. But an unexpected accident, illness or death can quickly change all that.
What if this happened to you?
There’s a common misconception that only middle-aged or older people need to think about insurance. Unfortunately, our claims files tell some eye-opening stories about:
– A young couple, both killed in a freak accident when a bridge collapsed;
– A younger mother killed by a brain aneurysm, just months after giving birth to twins;
– Another mother killed, trying to protect her disabled son from being hit by a car.
Sure, once you are older it is generally true that there are more risks associated with your health. But young people also tend to have fewer assets than older ones. That means there are no extra resources to draw on if, all of a sudden, a regular source of income is gone.
Don’t save now, only to pay a lot more later
Anyone who has purchased a home has probably been there. You start out by setting a budget, but then you find the perfect house that is just a little bit beyond. You can’t say “no” to your dream for only $10,000 or $20,000.
Then, you find out that property taxes are higher than you expected, and that’s only the beginning. By the time you get to the point of finalizing your mortgage, you’re more than a little nervous about the new financial commitment you’re about to take on.
It’s only natural to want to avoid unnecessary costs at a time like this. But insurance is not “unnecessary” – especially in a situation where you feel like you’ll be financially stretched. If you’re going to have to work hard to make ends meet now, what would happen if one of the family breadwinners were to die or become disabled? How would you continue to meet the mortgage payments with only one income, or with none?
Your family’s dream home could be that again – just a dream.
Questions on your mind
“If I’m going to buy insurance, shouldn’t I talk to an agent or financial planner first?”
You’re in the middle of buying a new home, planning a move… where are you going to find the extra time to sit down and discuss insurance? Even after you get settled in your home, most families are so busy. Exactly when will you be able to make insurance your # 1 priority?
Are you comfortable with the idea that your home may be at risk in the meantime?
So, by all means, make a plan to visit an insurance agent. But don’t wait to protect your mortgage. If you later find that Mortgage Protection Plan is not the best fit for you and your family, you can cancel it. We’ll even refund all your premiums if you cancel within the first 60 days. That means you have two months to shop around, and if you find a protection option that you like better than Mortgage Protection Plan, we protect you for free.
“So, maybe it is important to get something going now.”
That’s right, and buying Mortgage Protection Plan is virtually the only way to guarantee that you are protected right away.
You start by completing an application and providing us with your premium collection instructions ( a bank or credit card account from which we can collect your premiums). Once you’ve done that, YOU ARE COVERED – no matter what your health situation is, no matter how large of a mortgage you have (as long as it is less than $1 million).
That doesn’t mean that we don’t take your health into account at all. Insurance plans that work that way are usually very expensive.
We collect some medical information on your application and in most cases, that tells us everything we need to know. If not, we’ll contact you by phone to collect more details and possibly to arrange a paramedical exam. Based on that information, you may ultimately pay a higher premium, or your coverage may have some extra exclusions. The bottom line: we never decline a life insurance application.
But isn’t term life insurance the least expensive choice? Everybody says so.
Maybe, maybe not. The questions of cost is not a simple one when you are talking about a long term commitment like your mortgage. Just be sure you look beyond an inexpensive premium quotation and get more details. Here are some questions you might want to explore when considering a term life policy.
“What’s involved in getting coverage and how long is it going to take?”
Applying for term life insurance can be time-consuming. An associated company of ours tells us that it’s not unusual for it to take an entire month before a decision is reached. One MPP customer told us that in order to get a small increase in an existing life insurance policy, she would be required to appear for a saliva test – even though she had always been healthy and was only in her 30s. Not exactly convenient.
“What will my insurance cost in five years? In ten years?”
There are many types of term insurance, with premium rates that are fixed for different periods of time. Don’t be fooled by a premium that is very attractive today, but will increase dramatically over time. Your premium could end up being double or even triple the amount you started out with.
Our studies show that Mortgage Protection Plan can be quite a cost-effective choice.
“Maybe I should consider the bank’s insurance. Then my insurance and my mortgage are together in one place.”
Your mortgage lender probably does offer the convenience of “bundled” payments – in other words, your mortgage payment and insurance premium are all rolled into one amount, and collected at the same time. And they likely do allow you to carry your insurance with you, whenever you renew or refinance your mortgage with them. This is a good feature that can save you a lot of money.
But what happens if you want to switch your mortgage to a different lender? What happens if, at that time, you are no longer in good health? The fact is that switching to a different lender could mean you have to pay a lot more for insurance, or you might not be able to get it at any price. This is where the lenders’ insurance programs have a serious limitation.
Mortgage Protection Plan stays with you, no matter what. It doesn’t matter if you sell your home, adjust your mortgage, or switch to a different lender.
Your original coverage is also locked in at your original premium. So, if you first buy Mortgage Protection Plan when you are 25 years old, you’ll have protection at an extremely low cost for your entire amortization period, and you never need to apply or submit health evidence again. You only have to do that if you increase your mortgage balance, and need additional coverage. Even then, your original amount of coverage cannot be changed or taken away.