Even as we witness all the trials and tribulations of a hectic housing market here in KW and across the country there are certain basic elements to a sound financial plan for you and your family. Our home and the mortgage attached to it are most couples’ largest investments.
Knowing that – you have probably come across the issue of mortgage insurance. “Buy insurance to pay off your mortgage if you die. It sounds simple enough. But I want to tell you it’s not and there are other options I want to share with you. Other options I think are better for you, your family and your overall financial well-being.
Last month I shared my thoughts with you about the importance of doing proper estate planning – before it’s too late. Now I want to return to the topic of preparing for death in a way that will protect, and insure, your family and your most important asset – your home.
Insurance – It Plays an Important Role
You get insurance because you don’t want your family to be financially ruined when you die and your ability to earn money disappears. Your family needs to be able to find a way to keep going without you. You want to make that as easy as possible. After all, that is why you got insurance in the first place, right?
But let’s get something straight. You need to ensure your life, not your mortgage. Let me lay out for you what I mean and why I think it’s important so that you can decide what is best for you.
Mortgage Insurance vs Life Insurance. What’s the Difference?
The name of each of these kinds of insurance explains their role. Let’s look at them and compare
Mortgage insurance is generally arranged through the bank that holds your mortgage. Its benefit is that it is easy to set up and doesn’t take a lot of extra thought. For a small additional fee your mortgage is insured so that if you die while you still owe money on your mortgage, the mortgage will get paid off and you will not have to worry about that anymore.
But the problem with mortgage insurance is that your family has no flexibility around how to use that money. When you die your family’s first priority might not be paying off the mortgage. Other expenses or concerns could be more important.
With mortgage insurance, your family has no options. Yes, your mortgage has been paid, but that’s it.
Term Life Insurance Gives You Flexibility
With term life insurance, your family can figure out how best to use the proceeds. If they choose to pay off the mortgage, they can. And depending upon the amount you still owe on your mortgage on that fateful day, this might leave a fair bit for the other things in life. And if they decide you maintain their mortgage payments and use the payout that can also help cover the other costs you have beyond your mortgage.
And what happens when you finish paying off your mortgage? Do you still want life insurance coverage? Well, you’re going to have to go elsewhere now to get it. As you can imagine, beginning the process of looking for life insurance as you enter your “golden” years can be more expensive than you want. Getting and keeping term life insurance can be much more cost-effective. And the options for conversion to whole life insurance can also be beneficial.
Besides, you can also decide to change your coverage as your life circumstances change – something else that mortgage insurance allows for. When you remortgage your home or move your mortgage insurance needs to be reviewed and renewed. That isn’t really what you were looking for when you chose to move to a new neighbourhood was it?
Get the Insurance That Fits Your Life – Not Your Mortgage
If you want to talk about your insurance needs, your retirement savings, or even saving for your children’s college or university – send me an email at [email protected] or call me at (519) 279-0186.
Talking about your life insurance needs or how to plan for your estate can be challenging. I can help make it a little bit easier.
I look forward to hearing from you. To talk about your financial plans and to hear about your plans for the barbecue or the lake.
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