For the last several years Mortgage Life Insurance has drastically evolved and has out grown its name. Many banks and insurance companies are now referring to this product as Asset Protection. However, what is it they are protecting?
In the past Mortgage Life Insurance, did just what it says, "Life" Insurance. The policy holder could insure, in the event of death that the remaining balance of his or her mortgage would be paid out. This is meant to offer peace of mind and to reassure their family would be taken care of, by ensuring they may stay in their home. This has now evolved; mortgages can now be insured for death, disability and/or critical illness.
Mortgage Life Insurance will cover up to $1,000,000, in the event of the policy holder's death.
Disability Insurance will cover up to $3,500 per month in the event of a short term or permanent disability.
Critical Illness Insurance will cover up to $1,000,000 in the event of a terminal illness.
Benefits
· Portable (assuming no changes to the value of the original mortgage)
· Rates do not increase with age
· Benefit payments are not affected by other plans
· Easy application
· Payment can be built in with your mortgage
· Peace of mind and reassurance
Is Asset Protection worth buying for your family?
With Mortgage Life, Disability and Critical Illness Insurance you are covered for many of life's unfortunate twists and turns but it is important to not just sign the paper that your bank or broker places in front of you.
Back in Feb 2008, CBC Market Place ran a segment on two unfortunate situation where clients weren't totally informed about their policies. They signed up and were not able to receive the insurance that they expected when the time came that they needed to submit their claim. This however, should not scare people from buying this important policy; it does provide peace of mind as long as you fully understand what you are purchasing.
Now who sells this type of insurance?
By law in Ontario, whenever you secure financing for a home you have to be offered Mortgage Life Insurance. When a bank offers this type of insurance it's called a Creditor Insurance.
Creditor Insurance is offered by a Mortgage Agent and is considered a group policy. Its benefits are that you will never have a medical exam, the insurance is portable, and the premiums will never go up as long as you have your mortgage.
Term Life Insurance is a policy created specifically for you as an individual or couple. This can only be sold by a licensed Insurance Broker or Agent. Medical exams will be preformed and the policy is not a declining coverage. Often this type of insurance is cheaper however, because the policy is evaluated individually and you may therefore not be approved quite as easily. Also noteworthy, Term Life Insurance may not pay out if you have other Life Insurance policies in place. It is best to check with your Insurance broker before paying for this type of policy.
Do you have Mortgage Life Insurance? Let us know and also why your purchased it. Just post a comment below.
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