Len 00:02
Welcome. My name is Len Lane, and I am the founder and president of Brokers for Life Inc., and we are Dominion Lending Centers in Western Canada. The topic of our podcast will be about what we consider to be Real Life Mortgage Solutions. Welcome back. We’re actually in season three of Real Life Mortgage Solutions, and today we’re going to talk about some of the things that nobody ever wants to talk about. You’ve heard about all the other insurances, Your mortgage default insurance, which is protecting the bank from you, your home and the insurance, of course, then there’s title insurance. But today we’re going to talk about probably what I consider to be the most important, the one that actually protects your investment, and that’s life and disability insurance. Over the years of being in this industry, we have gone back and forth. We have been with a couple of other insuring companies, but in the end, we always end up back with MPP, so mortgage protection plan, owned and operated by Manulife. And my guest today is Bart Paterson, Business Development Manager, Manulife Mortgage Protection Alberta and Saskatchewan. Welcome to the show.

Bart 01:10
Thank you very much. Len. I appreciate it. This is a great opportunity.

Len 01:15
So, talk about MPP mortgage protection plan. What is it and how does it differ from other insurances that the client would come across.

Bart 01:23
It’s a great opening question, because I think when brokers do meet with clients, they’re coming to the broker for advice, and when they choose a broker, they have trust in that broker and ensure that the broker will look out for their best interests and provide them the product that fits their family and their needs right. And quite often, I think with brokers, it’s important to get the right product for the client, first off, but also mitigate the risk of these clients taking on this new debt. And you mentioned that there’s different types of insurance. And when you when we mention the word insurance, yeah, there’s default insurance, there’s home and auto, there’s title insurance. But what MPP is really, it stands for mortgage protection plan, and it is protection of your mortgage debt that you’re taking on. And so I think it’s really important for clients to know what insurance is protecting what. And to your point earlier, default insurance is generally for clients that have 20% less or 20% down or less, and it protects the client or protects the banks. MPP insurance for life and disability, it protects the client’s debt that they’re taking on. So that’s really the big difference, and this is optional. But also looking at when you’re having those conversations with the clients, it’s good intention to find out, hey, what type of insurance do you have, right?

Len 03:05
So, what are some of the stats to consider about why you need life insurance and disability insurance?

Bart 03:11
Well, we’re starting to see more and more. Like with cancer, ine in two Canadians will come down with some sort of cancer in their lifetime, which is alarming. And we also know that for disability, the average number of months people are off work is approximately 10 months. And so we know that the average savings that people have across Canada in their bank account right now is around $3,800 so how long will that actually last? Over 10 months if you’re unable to provide an income, right, because you’re off on disability? In fact, 56% of clients that do go on disability, they go back to work early, even though they may not be healthy because of financial reasons. And we also know that 33% of Canadians will go on mental health disability at one time as well. And where we see actual claims with Manulife within the first two years, we see 44% of those clients making claims.

Len 04:22
Really?

Bart 04:23
Yeah.

Len 04:24
That’s a huge number, right? I didn’t realize it was that high. And it’s funny to say, if you say $3,800 in savings today’s age and the amount of mortgages that people carry and stuff that that’s one month, that’s not anywhere near 10, right?

Bart 04:38
Yeah, and so it’s we also hear I have insurance through my employer, right? That’s the other one, another one that we say, okay, but do you really know what that looks like? And so you have to dig a little bit deeper. And then what happens if you change employers.

Len 04:57
Exactly, and that’s one of the biggest ones. I’m sure that a lot of young, first time home buyers, and they all say that. But a very good example of one of my clients who was skidooing on the Athabasca River in Fort McMurray, hit a sand dune under the snow and flipped a snowmobile, probably at about way over what he should have been doing, but probably 60 or 70 miles an hour, right? Big machines these days, 26-27 years old, licensed body man, broke a hip. Yeah. So you’re you spend your whole day bent over as a body man, right? Yeah. And he was off for a long time. He was off probably well over a year and a half, but it was and his first call, of course, was to me. Did he take coverage, and they hadn’t, because he had it at work, but someone who was probably a mid 150 to 175 income because of overtime, his 65% of coverage wasn’t on that. It was on the $70,000 base, right? So people don’t realize that even if you can’t live on 65% of you know of that if you have mortgages and children and things to pay, right? For sure.

Bart 06:00
Absolutely, and that also includes on the life through an employer, it’s generally speaking as one or two times your base salary.

Len 06:07
Yeah? Two is the outside, it’s usually one or one and a half, right?

Bart 06:11
Yeah. And so if you consider if you have family, if you have kids, after funeral costs, after your day to day expenses, if you’re paid for education for kids. How quickly that will go.

Len 06:24
Very quickly during university, right? So, so we start this conversation with the client, sometimes at the end, sometimes at the beginning, but really what is considered to be the best time to start to talk about the insurance?

Bart 06:38
I think for most brokers, it’s really important at that stage where you’re collecting documents, it’s really important to have the discussion around what type of insurance do you currently have? Because maybe people do have Term Life or Whole, like there’s Whole Universal, yeah, there’s many different types of insurance out there, and I think it’s fair for brokers to ask, how much insurance do you carry right now? For example, if you had a $500,000 term policy, I would say, hey, that’s great, but let’s look at the debt you’re taking on now. So in the event of a life incident, if you were to get that paid out, what do most people do? Do they pay down their debt? And so those are kind of the questions that we want to ask up front and just again, the reason for asking that is really, you know, we want to mitigate the risk that clients are taking on by this new debt and having just an open conversation about it.

Len 07:42
That’s probably the biggest thing, is getting it up front of the questions, because that’s it’s by the time everything else is happening with the mortgage and buying a house and doing all the real estate stuff, there’s some things to get set aside. So, benefits and features. So what are some of the definite benefits to this. So you mentioned a few of them already, not realizing that myself, until about a year and a half ago or two years ago, in a conversation that being diagnosed with cancer and having to go on treatment is considered a disability, and we had a client not long ago actually make a claim because of that. So what are some of the other benefits, I guess.

Bart 08:20
I think the most common ones, and the one that really makes it unique to the industry, is this product is portable, so it goes from lender to lender and property to property. In this industry, there is lots of big, major banks, the lawyers offices are all offering some type of creditor insurance. It’s important to know that most of those are not transferable. So if you are in a situation where your health has changed during a period where you have taken out creditor insurance and your broker has found you a better mortgage product somewhere else. You may not be able to transfer that insurance over because of health reasons, and quite so it’s really important to especially if you’re younger, this is a great product for anybody that’s young, because it does transfer from lender to lender and property to property,

Len 09:22
Right. And maybe we can explain then to them, you have term insurance. Term insurance comes up every 5, 10, 20 years, I guess, right, yeah, but at the end of that term, what happens to rates and coverage at that point?

Bart 09:35
Exactly, and if your health changes, or if so, your premiums will generally go up as you age. Right? With MPP, your premiums stay the same. And what we do is your premiums are amortized over 25 years, or over the lifetime of it, as long as you have that mortgage. And we quite often hear, Well, I’m paying premiums on a depreciating balance. Yeah, that might be true, but you are also looking at that premium never changing. So if you get to a point where you only owe $100,000 on your mortgage, you have the opportunity if you want. I don’t always recommend it, but you know you can cancel at any time, right.

Len 10:23
Right, and I actually hold a restricted license, obviously, to for MPP, and at one point I held all the insurance licenses many years ago. But it’s like people don’t realize that it’s either one of two things. Maybe, if you take a 25 year term, I don’t know how easy they are to get these days. But you know, even at the end of that, if you have to re-qualify 25 years down the road, if I got mine at 25 and had to requalify at 25 I had a heart attack at 48 so the next there is no next premium after that, that I had that type of insurance, right? But that’s one of the things I guess insurance does one or two things that stays the same and reduces the amount that you get paid, or vice versa, right? The payment goes up as the years go on and so.

Bart 11:09
And I think both really complement each other. So if a couple, or if a young couple, does have term insurance, I really think that the term insurance is really intended for their surviving spouse to live from, right, right? And the idea behind MPP is, really it’s mortgage protection, so it pays off the debt, and with disability, it pays your monthly mortgage payment while you’re off getting healthy, right? And I think those are the two things that really they I wouldn’t say one’s better than the other. I think they complement each other really well.

Len 11:46
Yeah, and I think that’s one thing that people don’t realize, though it’s that is the whole idea that you know, the life insurance you have already is for that, for life to go on, for your survivors, the debt coverage is to help them go on even better, as if they’re debt free, of course, right? So what if I have some coverage already, and I don’t think I need the full their average mortgages by $400,000 so, so what kind of coverage can I get then, if, if I don’t want to cover the whole debt?
Bart 12:17
So we offer what’s called, and this product came out as a request from brokers in the industry. We have a broker council that, over a year ago, suggested that we come up with a product that would in some parts of Canada and Ontario, BC, we see mortgages that exceed a million dollars, right? And so we’re looking at, we introduced a product called partial coverage. It’s available where maximum life insurance that you can or life insurance that you can have in Canada with manual life, MPP is a million dollars. So in Ontario and BC, if you have a property where you have a $2 million mortgage, you… it does happen, but if you did have a 200,000 or $2 million mortgage, the maximum we would offer is 50% of that, which is a million dollar coverage, right? So it does give you some protection versus no protection at all..

Len 13:21
Right? Yeah, and then maybe there’s a top up then if they do have other term insurance, as they make up some of that. Hard to get a million dollar policy, I would think even for just regular term insurance, maybe not as common as you would think, or as easy to get, I’m sure they’re going to want you jumping through some hoops for that to happen, right? Yeah,

Bart 13:40
No, absolutely, it’s quite expensive. And I think when brokers are having this discussion with clients, one of the things I used to do when I was a broker was ask my clients, what’s your greatest asset, right? What do most people think? Hey, it’s my home. Right? I live in it. I can walk in, I can relax in it, I can enjoy it, but in actuality, it’s your greatest liability until it’s paid off, right? And so we kind of look at, okay, here’s your assets and liabilities page. Well, you’re taking on this new debt, but your greatest asset is actually your ability to earn income. And what would your life look like if your spouse or you were unable to earn the income you do today? In the event something happens, whether it’s a disability or if, heaven forbid, someone passes, how will I take care of my mortgage? How will I take care of my my family?

Len 14:42
Right, exactly, yeah, it’s and that kind of brings around to that question, so what is the client’s why, right? And I think that’s important for new brokers to kind of put that thought, I guess, out there, into into words, and say, okay, so what happens if is this, why would you not insure is another question. I’m willing, for the, especially for the younger people. If you’re under 40, and it’s your first house, and you’re just starting a family, insurance, and in those days, I carried a lot of insurance, actually, but now they’re all grown. They all have their own houses. They all make good money. So just Margaret myself, so keep her happy after.
Bart 15:21
And I think it’s important to bring it up like we talked about bringing it up at the beginning. But also, when you do the submission to the lender again, say we can do what’s called a quick quote so we can provide if the client comes to us and says, I have my monthly mortgage amount that I can afford right now it’s $3,000 well, we can include our this premium into that $3000 so it’s actually built in when we’re doing pre approval. So when the client does find the property and it’s been approved, we can go, Hey Mr. Mrs. Client, here’s your $3,000 monthly payment included is the insurance. So then there’s less pushback on the cost of it, because it’s already built into your monthly payment.

Len 16:12
Right. And that’s where the banks are so good at it, I think in is that they basically call that a insured payment, right? So, right, your taxes are there. Your property taxes are built into it. Your monthly PI is, that’s where the PIT comes in. And then, of course, an insurance payment included into that gives them a better sense, I think, for their budget. If it’s three grand, then, you know, we can probably come in under lower that with most of our average mortgages, including at that extra payment, right? So,

Bart 16:42
Yeah, and what’s nice about doing it that way is, again, we’ve talked about it, it’s now included in the monthly payment. Another feature that we offer is a 60 day guarantee, right? And what we mean by that is we can, the first 30 days of insurance is free, and we’ll collect one month’s premiums. And then if gives the client most quite a few brokers will say, Here, based on the at the beginning of our conversation, I know how much insurance you have based on what I see, take this insurance now, if you can find a better product, and in 60 days you want to cancel this, you’ll get your premium back. Your hands are clean, right? There you go. But most people that do take this insurance and understand that it protects them we’ll keep this in place.

Len 17:42
Yeah, exactly, right. So, and simple to do that within our system, of course, to get that quick quote in place, it’s, it’s built right into our into Velocity, so you can have that number well in advance of that final conversation when you’re just trying to sign off the papers and move on to the next thing, right? So, yeah. So what does it mean to be indemnified?

Bart 18:04
Indemnification, and Manulife is the only insurance company that will indemnify the brokers. And what we mean by that is in the event a client comes back and says, Mr. Broker, didn’t talk to me about insurance, I’m going to sue you, the broker, and I’m going to sue Manulife. And this has happened, and we do get cases from time to time, but as a broker, we have an obligation to clients to mitigate the risk that they’re taking on. That’s our job. And as advisors, it’s best that we talk about this product. As long as you’re doing that, we will indemnify you in the case of if there is ever a lawsuit that comes up.

Len 18:56
But that only comes if they actually waive the coverage, right, correct? So, and I’ve had a few agents of late who started and said, well, we talked to them about it. I’m going like, well, first off, you’re not licensed to talk about insurance your a mortgage broker, and that’s why we have this form. And I’m big on using the links. And here my spiel to go with that is, I’m required by law to offer you life and disability insurance on your mortgage, regardless of your decision. I do need you to complete this before you remove condition. Yeah, right. So condition of finance. If you remove condition of finance, and this has probably happened more times than we can probably know about, if something happens to the client between Removal of Conditions and actually possession of the house, their estate becomes responsible for the finishing the purchase of the house, if it was insured of course, right from from signing of that to removing conditions that would take that ease off the estate probably take a little while for the process to happen, but it would definitely save some major issues, I think, for the people don’t realize exist out there for them, right?

Bart 20:00
So, yeah, and that’s a great point, because we have seen cases where people haven’t even taken possession. They’ve applied. So the moment you apply, or we receive the application, if they apply, they’re automatically approved for accidental life and disability, which is a lower amount, right? Until it’s fully underwritten. And what I mean by fully underwritten is it takes four to five business days for our underwriters to reach out to the client and go through the health questions, if they’re saying concerns, right? But once it’s fully underwritten, then there’s full coverage. And that stays the same for the life mortgage, the premiums never change.

Len 20:42
Right. Exactly, right. Yeah, no, that’s a great point. Lots of stories over the years, of course, of what’s happened to clients and who had and didn’t have, the only calls they ever get is when they didn’t have, I think, yeah, unfortunately, but I had seen it where client had refinanced their house, an older gentleman to help his almost spouse, his girlfriend, I guess, right by set up a salon, right? So they used the money for that. Unfortunately, he had an accident and on his motorbike passed away. And that whole mindset of, okay, it’s 500 bucks, well, the business should have been able to pay the $500 and cover that insurance, is how I saw it should have been, but that’s how they saw it, right? So, lots of scenarios, for sure, within the team and lately, clients diagnosed with cancer, having to go on chemo for several months, right? Yeah, able to claim it under it as a disability, is an excellent feature that I know that everybody goes well, you don’t have what’s the other one called, there’s a critical, critical illness, right? So different again, but one way or the other, you end up being disabled, whether it’s part, partially or for how long, is always a question, of course, right?

Bart 21:56
Yeah, absolutely. And the one other thing I’d like to just bring up too is, we do hear the objections. So there’s really three objections on top of mind. The first one is, it’s too expensive. How many times do you go to Tim Hortons or to Starbucks a week? I think more people go to Tim Hortons now than Starbucks, maybe, I don’t know, but it’s also, if you go for dinner two or three times a month, you know the cost of dinner for two, that can average 100 bucks easily. And so we want to just kind of put it into perspective for peace of mind that you’re covered in the event something happens. It’s really important to talk about that and the cost of it, versus, even if you have auto insurance. You look at the cost of auto insurance, this is a much most cases, this is the larger debt, and the premiums are a lot less. So it’s kind of, yeah.

Len 22:58
Yeah, when you think about your car insurance, you’re, I think mine is about $2,600 a year, yeah, with zero things on my bureau for years or on my driver’s license. So it’s like 200 bucks a month to two and a quarter, something like that. So it’s like, and it’s a $60,000 car. It’s not a $60,000 house. So that’s a good comparison to use, because there’s a lot of young guys paying a lot more than that. I know my son at one time, paid big dollars for being young and young for having issues. But no, it, yeah, that’s a good way to compare that.

Bart 23:29
It’s funny, I was out at the airport the other day and I go, Okay, I know where I am. Like, you look in the parking lot, there’s trucks. They are not, they are not cheap trucks.

Len 23:41
Yeah, there’s hardly a pickup anymore. That’s a basic pickup is probably $70 or $80,000 easily. So my son’s Denali, when he sold it, he got $80,000 for it when it was five years old and full of dog hair and but now that same truck to go buy it, it’s probably 100 and a quarter.

Bart 23:57
Yeah, and I don’t think they’re going to come down in price. So it’s…

Len 24:02
Well, if tariffs hit it’ll go up to 25% and that’s they said $12,000 on that average car. So stuff will be… like something.

Bart 24:11
So you know that the insurance companies are thinking about that now too, right?

Len 24:16
Oh, definitely. Right. So, yeah, yeah.

Bart 24:19
And the second one that we hear quite often too, is the I have insurance through my employer. And you and I talked about this earlier. I think the one big thing to think of, though, is if I change employers, know that doesn’t go with you. That’s the big thing. The other thing too that we’re seeing with employers to cut costs is now they’re contracting people, right so they don’t have to pay the benefits. So we have life and disability. If you’re self-employed, these products are standalone. So if you become self-employed, please investigate the disability. I encourage any broker that’s having a conversation with self-employed or business for self please talk about the disability.

Len 25:11
Right, yeah. And we see a lot of people who became, you know, were carpenters working for somebody else, who went out on their own to do renovations and stuff like that. So definitely nothing to back them up if they’re unable to go to work, right?

Bart 25:23
Yeah, absolutely. And the last one is we hear, we’ve heard this before, where term insurance is better than this term better than mortgage protection, and again, we’ve addressed this. I think the two complement each other. I think when it comes to term insurance or whole life or universal, that’s really intended for the surviving spouse to live? The MPP mortgage protection is to protect the debt that you’ve taken on. And that’s all, and that’s at the end of the day, we just want to ensure that people have the option anyway, right? That if you have, it’s presented and they can make their decision based on the information provided to them.

Len 26:11
Right. And the other point is that disability also pays your property taxes, correct? I think it’s one that people miss, even if you’re not paying your property taxes, most majority of the people I that, I think our clients, put it on just on a monthly payment, one way or the other, whether that’s with the lender themselves or directly with the municipalities, it doesn’t take long get too far behind on your property taxes and the city will come knocking. They can delene your property or do something to make sure they get paid right, so.

Bart 26:39
Taxes and what’s the other one taxes and death. I hate to say it, but yeah. It’s the tax man gets their slice first.

Len 26:51
That’s right, yeah. So always good to have that covered as well. So anyways, Bart, I thank you for your time that lots of great information, not only for the broker world, but for clients as well, to give them some idea of what that MPP program can do for them, like I said, it’s their biggest, the biggest asset. And of course, disability is, like you said, more prevalent than people realize, on a lot of different levels, so always was good to make sure they have the right coverage. So yea.

Bart 27:20
Absolutely

Len 27:21
Okay. Thanks for your time.

Bart 27:21
Okay, thanks. Len, I appreciate the opportunity. Appreciate it.

Len 27:26
Talk to you soon.

Len 27:26
Thanks for listening today. I hope you found the information that we provided to be useful in your mortgage journey. And remember, you can always find our associates at www.brokersforlife.ca/associates. Have a great day.