March 17

Mortgage Disability Insurance



What is Mortgage Disability Insurance?

Mortgage disability insurance is a form of income protection that will pay a monthly benefit equal to the value of your mortgage payment. The purpose of all income protection is to protect your most valuable asset: your ability to earn money. The purpose of owning mortgage income protection is to make sure that no one can take your home away from you if you get sick, disabled, or die.

Losing your ability to make money for even a few months could be devastating for you and your family. Studies have shown that nearly 50{a03822e28c5c906589e58caafc71b922ff7b2692d58bfeefe8f12d55f85871c7} of all mortgage foreclosures in Canada are caused by a disability or critical illness. In other words, if you get injured or sick for a prolonged period of time it is likely that you will not be able to make your mortgage payments and will have your property foreclosed on. 

The average disability that lasts more than 90 days is over 2 years! Think about that for a second, how would your life be affected if you could not earn money from working for 2 years? Would you be able to pay your mortgage? If you are able to, would you be able to pay for other things? 

Mortgage disability insurance provides a solution to this problem. It makes sure that you are covered, when you cannot cover yourself; allowing you to keep your home.

How can Disability Insurance Protection benefit me?

Just like other forms of income protection, this is an affordable way to enjoy the peace of mind and security of knowing that when life happens to you, you will be alright financially. With the coverage that this provides, you know that you have managed your risk properly and that you’ve taken the necessary steps to protect yourself and your family.

People that own mortgage disability insurance make sure that getting foreclosed on will not be happening to them if they can help it, even when they are totally disabled. Your home is probably the largest purchase you will make in your life, to afford it you may need a large mortgage. When that is the case owning mortgage disability insurance will help you sleep soundly at night. Knowing that you have taken the necessary precautions to guard your family’s financial security, you can go about doing what you should be doing: enjoying your life.

What are the different types out there?

There are basically three types of mortgage disability coverage:

  • Mortgage Disability Insurance: 

This can only be obtained if it is applied for through a licensed insurance professional. Once in force it gives clients access to the best terms and conditions available in the market. It is usually more affordable than other forms of mortgage disability protection, more flexible, can be customized, and will offer the most comprehensive coverage. The benefit payments can continue until the age of 65 if need be, ensuring that one is fully protecting their mortgage against a disability.  If you are healthy, you should get in touch with a broker and apply for this plan, it is usually your best bet.

  • No Medical Exam Mortgage Disability Protection:

Although the premiums may be a little higher, and the coverage may not be as comprehensive (monthly benefits lasting up to 2 years). No medical exam mortgage protection is easily obtainable and has certain benefits over creditor protection from the bank. One of those benefits is that you can port your mortgage to another institution and not have to give up your coverage. This allows you to have more control, which is beneficial.  This is a good option for you  if you are  wanting a streamlined underwriting process, with no medical exam.

  • Bank Creditor Protection:

When applying for disability income protection one should always avoid obtaining their insurance from the bank. The reason for this is because with creditor protection you don’t own the policy, the bank does. That means they can change the terms and conditions at any time. This is a huge problem because even after putting the policy in place, before you get a disability if the bank deems fit, they can cancel your coverage. If a disability occurs and one is making a claim, you have no control on how the monthly benefit will be paid out, why? Because it won’t be paid out to you, it will be paid out to the bank (to make your mortgage payment). That’s right! owning creditor protection is protecting your creditor, the bank. What happens if you move your mortgage to a different lender you ask? Well, you can’t take your coverage with you, you lose your coverage and may have to re-apply and pay higher premiums because you are now older. With this form of coverage you have the least amount of control. There are better options for you out there, no matter what your situation is.

How can I save money on my mortgage disability protection?

The best way to save money on your mortgage disability insurance, is to send your application to the insurance company that is best for your unique situation. Only then, can you be sure that you are able to get the best terms and conditions.

If you don’t have time on a day to day basis to figure out which insurance company is best for you, then work with an insurance broker. It never costs you anything, because insurance brokers are paid by bringing business to insurance carriers. You will never need to write them a cheque, you will make payments to the insurance company just like you normally would even if you didn’t use an insurance agent. 

Working with an insurance professional, a proper analysis can be done, and a plan tailored to each individual’s needs. This is then sent off to the insurance company that is most likely to approve the application with the best terms and conditions on the market the first time.  When done properly, this one tip can save you hundred’s of dollars a year in premiums.

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