March 30

Family Mortgage Income Protection in Canada

Term Insurance

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In Canada, the biggest monthly expense for young families is usually their mortgage. Owning our principal residence has been a fundamental building block of wealth for Canadian families for a very long time. An asset that has shown to gradually appreciate since our nation was founded.

Our home is more than just an investment though, it is a place where we can hang our hat when we come home. It is where our children are raised, where we can feel comfortable, safe, and secure. 

It is for this reason that it is imperative that we protect our most valuable asset from being taken away from us if we pass away, become injured, or are diagnosed with a life threatening illness

Our lives and our health are not easily replaceable. With an income protection plan, our income is easily replaceable. Let’s discuss three crucial strategies that we can use to keep our home and stay financially secure. We owe it to our families to make sure that we are not taking chances with what is most important.

Mortgage Protection Life Insurance

Few things cause more damage to a family than the loss of a loved one, particularly one whose income the family depends on to get by. When a principal breadwinner passes away, not only is their loss mourned, but the stress of having to replace their income is also felt.

When this income is not replaceable, which is usually the case shortly after a death, what’s left of the family is forced to downsize. This often means that mortgage payments cannot be met and the family has no choice but to either lose the home to foreclosure or sell the home urgently. Urgently selling the property, depending on market conditions in Canada at the time, may not be the best option. Losing the property to foreclosure is no option at all. 

However, the solution is simple: owning a mortgage protection life insurance policy will avoid the losses and added pain of not being able to afford the mortgage any longer. It is a lump sum, tax free benefit that is paid when we pass away to our loved ones. This money is then used by our beneficiaries in anyway that they like, often to pay off the mortgage, or other debts.

Nothing feels better than knowing that the ones we care for will be cared for when we can no longer do it. Fortunately, a mortgage protection life insurance plan is affordable

Example:

Don lives in Canada and is a 35 year old non-smoking male in standard health. h=His premiums would be around $23.00 a month to cover a $500,000 mortgage. That means his beneficiaries would receive a death benefit of $500,000 which could be used to pay the mortgage off.

Debbie, his spouse, is a 35 year old non smoking female in standard health. Her premiums would be around $18.00 a month to cover a $500,000 mortgage.

This couple could secure their home, their family, and their income for as little as $41.00 a month combined. If either of them where to pass away the mortgage would be paid off, leaving their family with the peace of mind of knowing they won’t be losing the roof over their head.

Mortgage Protection Critical Illness Insurance

Now, more than ever, Canada has many households that are having to deal with the diagnosis of a life threatening illness. Fortunately, when they are diagnosed with heart attack, cancer, or stroke they are surviving more often than before. But the bad news is they are often unable to go back to work immediately because they must recover from their illness or surgery. Even worse, due to the health care system that we have in Canada, you may not be able to get care or an operation in time as there are often long wait times (months to years).

Making matters worse: If one cannot go back to work, often they are unable to generate the income that they require to pay their mortgage. Few things are worse for your recovery then stress. The stress of not being able to make mortgage payments can make it harder to recover. Never mind the fact that missing mortgage payments could result in the loss of the family home. In fact, almost 50{a03822e28c5c906589e58caafc71b922ff7b2692d58bfeefe8f12d55f85871c7} of foreclosures are caused by an illness or disability (a much higher percentage than foreclosures caused by a death).

How can we avoid this? A doctor can help you avoid a life threatening illnesses, but a mortgage protection critical illness insurance policy can replace any lost income that may be lost. In Canada, this strategy will pay out a lump sum tax free living benefit to us if we are diagnosed with a critical illness.  This money can be used to pay our mortgage down, make mortgage payments, travel, get healthcare, or do anything else we want with it.

When using term mortgage protection critical illness insurance it is relatively inexpensive. Let’s use Don and Debbie as examples again:

Don is a 35 year old, non-smoking, male, in standard health. His income is $75,000 and he decides he wants to replace one year of his income which after taxes is around $50,000. His premiums would be around $22.00 a month. He could effectively take a year off after getting ill with the money that he would get as a living benefit.

Debbie is a 35 year old, non-smoking, female, in standard health. Her income is $75,000 and decides to replace one year of her income which after taxes is around $50,000. Her premiums would also be around $22.00 month.

Owning the peace of mind that knowing your home will not be taken away from you is priceless. Even if you get a life threatening illness you can secure your families future for very little. For Debbie and Don the investment is only $44.00 a month. Something easily affordable, making the disaster scenario of not having this protection in place, easily avoidable.

Mortgage Protection Disability Insurance

For young families, playing defense is more important than offense.They have too much responsibility. Their job is to protect, nurture, and raise young children. Trying to build wealth and secure their retirement leaves very little margin for error. One mistake to avoid is not planning for contingencies if we become injured.

Being injured may make it impossible for us to go to work. If we cannot go to work, we often will lose income. Once this income is lost, we may be struggling to pay our bills, especially our mortgage which is usually our biggest bill. The inability to pay our mortgage can cause an all too familiar problem: losing our home to foreclosure or being forced to sell our home because we can no longer afford it.

A very large amount of foreclosures in Canada are the result of an injury or critical illness. Financial problems are one of the largest causes of divorce in Canada simply because of the stress and strain that is caused. You can be sure that losing your home because of an injury will cause plenty of financial strain on your marriage.

We have the power to avoid this terrible predicament. By using a mortgage protection disability insurance policy we can secure a tax free monthly benefit equal to the mortgage payment for 2 years or more while we are regaining our health. Let’s use our good friends Don and Debbie as examples again.

Don has a $500,000 mortgage with monthly a payment of $2500.  He is a 35-year-old, nonsmoking, male, who works as a lawyer. His monthly premium to cover his mortgage payments if he gets injured are around $24.00.

Debbie has a $500,000 mortgage with a monthly payment of $2500. She is a 35-year-old, nonsmoking, female, who works as an accountant. Her monthly premium to cover her mortgage payments if she was to get injured is around $36.00 a month.

Keeping your family safe and secure by protecting against an injury has never been easier. For Debbie and Don having an income protection plan that covers their mortgage payments for the next 2 years can be as affordable as $60.00 a month.

Summary

Our two most valuable assets are:

  1. Our Income
  2. Our Home (principal residence)

If we leave these unprotected, we run the risk of denying our families the security, safety, and joy that we get from our home. That’s why mortgage protection insurance is critical for young families. The total premium for both Don and Debbie combined to protect their mortgage against death, disability, and critical illness is only $185.00 a month in total. A small investment in the future of our families with potentially huge benefits to us right when we will need it most.

To put your own mortgage insurance protection plan in place get in touch with a licensed insurance advisor. They will help customize the best plan for your family after completing an insurance needs analysis, and a health & lifestyle evaluation. That will assist them in determining what the best type of coverage is for your unique situation. Matching you up with the best insurance company will potentially save you thousands of dollars in premiums over the life of your mortgage. 

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