Mortgage life Insurance is something that many people think is a waste of time and money. In all honestly if you haven’t insured your biggest investment separately then all of your good planning for retirement and becoming financially independent will can go out the window if you are disabled, become critically ill or worse yet die and leave your loved ones with nothing.
60% of Canadians have some sort of life insurance through work but is it enough? Many employers offer death benefits of 250000 to 50000 flat benefits or maybe 1 or 2 times your base pay. Disability offered is usually 60 to 70% of your base salary and less than 10% of group plans offer any type of critical illness coverage.
Having a Closer Look at Mortgage Life Insurance
Let’s look at mortgage life insurance closer, if you have a 500000 dollar policy on yourself at the moment and you mortgage is 5000000 then you would think that it is a wash. Here’s the other fact that needs to be taken into consideration that if your spouse has not worked outside the home for quite some time then they will need to return to the work force and start at the bottom of an organization which may not provide enough extra income to keep your home in maintenance and taxes. So the wash becomes a loss very quickly. Would it not make more sense to have a separate policy that pays out the mortgages and leaves the surviving spouse with a cash amount that will take care of them as well.
How Mortgage Life Insurance Works
Mortgage life insurance works like this, your premium is set at the beginning for the life of the policy. As you grow older the premium does not go up but the amount of payout goes down. If you were in a regular term life policy one of two things could happen, as the term expires you have one of two options, rates either goes up or the value of the policy comes down.
Insuring your most expensive asset just makes sense to do it separately so that at the time of your death everything is taken care of properly and you leave no one in need of money.