As a Mortgage Broker, I have an obligation to my clients to “offer” mortgage insurance. What does that mean? It means that you have choices with life, disability and critical illness or an option to waive all however since I am not a licensed insurance agent, I cannot advise, only offer these solutions. Unfortunately, creditor insurance has a bad reputation as being very expensive in comparison to a more comprehensive insurance plan. This may be true in some cases however creditor insurance policies can also differ vastly from one company to the next.
In any case, as I wrote – I am not an Insurance Agent/Broker so cannot explain the intricacies of these offerings. What I can do is encourage you to look at all your options to see what best suits you.
I closed a mortgage for a lovely couple in their early forties a few years ago. The husband was the main breadwinner and his wife, a stay at home Mom to their two young children. I offered the mortgage insurance to my clients and they quickly declined saying that they believed he had enough coverage at work. I suggested that it would be in their best interest to confirm this before they waived the insurance however, they were adamant that there was plenty should anything happen to him. I also suggested in addition to his coverage at work, they may want to seek the advice of an insurance professional for a more comprehensive insurance package. They ensured me that they had it covered so I left it there.
A week and a half after closing I receive a call from Mrs., she tells me that her husband passed away suddenly from a massive heart attack at the young age of forty two. I was in shock hearing this but more in shock for what came next. She told me that she checked her husband’s employee group insurance and in fact there was not as much as she had hoped for. Her husband opted into the most basic plan with work and therefore left the world without even having enough to pay off the mortgage. She was calling to confirm that they had waived the creditor insurance and it pained me to tell her that they had. If they had taken the time to understand what they were insured for then Mrs and their children would be in a much better financial situation now then they currently are. I am certain that this was not his intent. The lesson here is to do some research and find out what amount of coverage and what kind would be best for your particular situation. The alternative can be devastating to you and your family.
Personally, I am an entrepreneur, self-employed and therefore not part of any group plan with an employer. If I want to purchase insurance, I would have to either purchase creditor insurance or a more comprehensive plan. I chose to seek the help of an insurance broker who made suggestions that we eventually were going to finalize. Being self-employed, I was also choosing not only life insurance but also critical illness and disability should I be unable to work. The premiums for the critical illness and disability were high but I was prepared to go ahead with the plan. My patient insurance broker chased me around for about six months to sign documents and put the policy in place. I was so busy with work and life in general that I kept putting him off until one hot weekend in July of 2011 I found a large lump in my right breast. After going to the doctor for tests the following day, I called my broker and asked if it was too late to sign the documents. He told me that if the diagnosis was cancer, that it would be too late to sign. I think I knew immediately that I was in trouble but it wasn’t until August 26th that I was diagnosed with stage three breast cancer.
If I had signed and set my insurance plan in place six months prior, I would be collecting $300,000 in insurance under the critical illness policy. That’s a tough pill to swallow especially when I didn’t know what was ahead of me or if I would be able to continue to work. Luckily, during 6 rounds of chemo, 25 rounds of radiation and six surgeries I was able to continue to work and business was up 30% year over year during the most challenging years of my life. It could have been a dismal story if I couldn’t work and continue to financially support myself. I am happy to share that it will be five years on June 20th when I will be considered cancer free and cured! The lesson here is that if you are self-employed, take the time to consider worst case scenarios with your health. This may encourage you to not do what I have done but to make sure your are adequately covered insurance wise.
You just can’t predict what can happen.
Kim Gibbons, Mortgage Superhero ®
FSCO lic. M08001363
Your Toronto Mortgage Broker