Mortgage Insurance In Canada: Which Mortgage Liability Insurance For You?
There is a lot to think about when you buy a house. All of a sudden your assets have increased by 50, 100 ,200%! You have probably already started thinking about protecting it with mortgage life insurance.
This protects your family if you are gone, but what protects you, what keeps you in the home if you are not able to pay your home loan in case you are disabled and unable to work and earn your normal salary?
The first place to start to look for a disability insurance policy is an insurance planner. Normally a professional such as this will review your needs and perform an analysis of your income and your mortgage and home related expenses such as property taxes, hazard insurance and maintenance as well as your other finances to learn out what would best fit your needs.
Even if you already have disability insurance from a government program or from your place of work, this is normally based on a “maximum qualifying” debt to income ratio of 36 to 50. This means that the entirety of your debt, not just your home related debt, should be included. You may have a car loan, credit cards and other fixed expenses that you have to continue paying. Your disability policy will be unlikely to cover all of those expenses and your mortgage expenses as well.
The options you need to be aware of when choosing mortgage disability insurance are the benefit period, the elimination (or waiting) period and any riders that may exist.
The simplest feature is the benefit period, which is how long you will be able to collect benefits. Normally the benefit period will extend until age sixty five, but savings in costs can be realized if the benefit term is shortened. If there are conditions that may allow you to shorten the benefit time, such as social security benefits of a spouse, or starting penalty free withdrawals from a retirement plan at 59 , for example, you may consider this savings mechanism.
The elimination period is the how long you must be disabled before can collect benefits. Again, if you can extend the waiting time, your premiums will be lower. If you are in the habit of saving for emergencies, these funds may carry you over for a length of time before a longer term benefit is required.
Many companies will have certain riders that can be added in certain cases. One of the most usual is an inflation rider, that increases the amount of the benefit as the cost of living goes up.
Viewing all of these options can be difficult, but it is important to be aware of what exists. This allows you to ask the right questions and get the best policy.
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