Do You Need Mortgage Protection Insurance?
When you buy a home, it’s wise to have some type of protection in place to cover your mortgage in the event the main income earner dies or becomes disabled. Mortgage protection insurance is one such option.
Keep in mind that this is different from the default insurance you pay if your down payment was less than 20% of the purchase price of your home. Default insurance ensures that the lender is repaid in the event of a default on the loan.
It’s important to have mortgage protection insurance, because it shields you in the event you cannot make payments due to an unforeseen event like the death of a main income earner.
If you have mortgage protection insurance, the payments would still be made for you.
In some cases, homeowners will have enough resources, either in savings or investments, to guard against such calamities, but many don’t. If you have a life insurance policy, for example, it might be earmarked for the protection of your family. This is where mortgage protection insurance can be beneficial. Since your home is your largest single investment, it makes sense to protect it. Following are some facts that highlight the importance of proper protection:
- 44% of mortgage protection claims happen in the first two years of the mortgage.
- 11% of Canadians suffer some form of disability.
- 43% of those disabilities are severe or very severe.
Make sure you do all your homework. Some plans allow you to cancel at any time or even refund all your premiums if you find a better option. Others offer a 60-day guarantee period.
And make sure to compare the costs of a mortgage protection plan to a term insurance policy.
Some protection plans are more cost-effective and offer better options than term insurance.
Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).