Life and Disability Insurances on Mortgages
Life and Disability insurances on Mortgages seem like bad words to most people...They definitely should not be...Yes...your banker or broker is selling you this for a couple of reasons...Of course they may earn a small bonus for doing so and the bank or lender is making money off it however there is something much more important that the clients need to be considering...
The most important thing to think about with this is your ongoing ability to ensure your family is taken care of...If you pass away then the mortgage is paid in full and with disability insurance the payments are paid when you are ill and cannot work...
I hear too often clients reply that " they get the insurance at work" meaning they have some amount of life insurance and disability insurance...The fact is...the majority of people do not know how much of either they have...
I am not trying to get you to automatically take whatever your banker or broker offers...what this would do is inform you that you will need to review your needs with a Financial Planner...
Mostly employers offer small amounts of Life Insurance...and you are able to review this and possibly increase it by your mortgage amount for a similar amount to what your bank is offering...make sure you review this...Banks offer the insurance and it is easy to approve and in place instantly...with other forms it may take months to get an approval...so consider all forms to see what fits your needs best. And is the most cost effective...
Disability insurance is even more difficult to discuss with clients...they never think they will need it and always assume their employer will look after this...however I hear it too often where someone is behind in their payments because they are off work for some reason...Most employers have a small percentage of your income covered...you can top this up with Mortgage Disability insurance to make sure you have the needed coverage...remember just because you may be sick...the bank is not going to let you not pay your mortgage payments...
Yes...they may cost...however they will ensure peace of mind if you are ever in a situation that needs either one...
For example...my very good friend passed away years ago at the age of 28, from an aneurysm...on his first wedding anniversary...and had an 8 week old daughter...I am sure he did not expect this...however he had good life insurance coverage and all his debts were paid off plus his widow had money to live on while she got her life back together...these things happen when you least expect them...and that's what insurance is for...so review your needs...
I am sure we can all think of someone that has been in a similar situation so review your needs...
C.E. (Chuck) Barrington BBA AMP
Mortgage Specialist
BMO Bank of Montreal