[ad_1]
This insurance coverage is typically a combination of life insurance and disability insurance. In the event of death, the life insurance component of the policy pays off the outstanding mortgage. In the event of disability, the disability insurance component of the policy makes your regular payments.
Banks are prohibited from selling most types of insurance in their branches other than life and disability insurance on credit products. The Canadian government has purposely done this to encourage competition in the insurance industry (primarily to ensure low premiums) as well as to avoid tied selling (needing to buy insurance in order to get approved for a mortgage).
When you sign the multitude of papers the bank puts in front of you to get a mortgage, the financial adviser may ask you to initial a document to either insure or not insure your mortgage. My guess, Katerina, is that you initialed that “yes,” you wanted mortgage life insurance, also known as mortgage protection insurance.
A number of years back, I got a mortgage and specifically opted out of mortgage life insurance. Not long after, I realized that my mortgage was “protected” with mortgage insurance that I had said no to in the first place. So sometimes, you end up with mortgage life insurance even when you don’t want it!
Katerina, mortgage life insurance is more expensive than most group or individual insurance coverage. So you’re probably right—it is likely pretty expensive compared to other insurance alternatives.
When to consider mortgage life insurance
Sometimes mortgage life insurance is a good idea. For example, if you have a medical condition or illness that might make it difficult or impossible to get life or disability insurance separate from your mortgage. But for you to have insurance when you are retired and don’t have any beneficiaries, Katerina, is questionable. I’d say that most average Canadians should be considering insurance solely as a risk management tool. That is, if there is a financial risk of you becoming disabled or dying either to you being able to provide for yourself or for your beneficiaries financially, you should consider insurance.
If you die, Katerina, with no family and no beneficiaries, the insurance serves only to provide a larger estate for you to leave to friends or charities. I’d say the cost of you incurring expensive insurance premiums at the age of 70 on an expensive mortgage life insurance policy is not even remotely appropriate.
Mortgage life insurance is profitable for banks. And it’s profitable for the financial advisers who get you to buy it. They’re often bonused on making sales like mortgage life insurance.
[ad_2]
Source link