Whats Life Insurance With Increasing Cover
If you have a life insurance policy with increasing cover, the level of cover, and your monthly payments, may increase over time to help protect your cover amount from the effects of inflation.
With our Life Insurance Plan with increasing cover, the level of cover increases annually in line with the Consumer Price Index , a recognised measure of inflation, and your premiums will also increase annually to reflect this. The maximum amount your cover can increase by is 10%, and your premiums could increase by a maximum of 15%. If you choose not to accept the increase, or if the CPI doesn’t increase, your cover and premiums will stay the same.
The policy pays out a lump sum if you die during the policy term, or are diagnosed with a terminal illness and arent expected to live longer than 12 months. The policy will only pay out once, so if you make a successful terminal illness claim, a second claim cant be made. Theres no cash value at any time.
Costs You May Want Taken Care Of For Your Loved Ones:
- Your funeral and estate fees. A funeral in Canada can cost up to $20,000, but the average cost is about half that much. You also want to add those costs to settling your estate.
- Mortgage and/or other debt repayments. This includes the outstanding balances on your mortgage loan, student loans, credit cards, lines of credit or HELOC,;or any other personal loans forgiven at death.
- Childcare. If you have young children and your spouse works, be sure to include the total cost of full-time daycare until they are school age, plus part-time daycare and/or camp after that.
- Post-secondary education. This might include some or all the tuition for college, university or post-graduate degree.
- Living expenses such as food, rent/condo fees, clothing, utilities, transportation, home/car maintenance, property taxes, retirement fund contributions, etc.
- Extras such as travel, gifts, etc.
Is Mortgage Life Insurance Mandatory
Again there can be some confusion here. Mortgage life insurance is not mandatory. It is optional. However, mortgage loan insurance can be mandatory. It depends on the amount of the down payment on the home. ;If the down payments were less than 20% then the sale price of the home, the insurance is mandatory. ;Its;referred to as mortgage default insurance. Some mortgage lenders may not lend the money if there is no mortgage life insurance in place.
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Types Of Mortgage Life Insurance
Mortgage life insurance policiesalso called mortgage protection life insurance or mortgage protection insurance policiescome in two basic forms. The first one is a declining payout policy, where the policy size decreases proportionally as the mortgage loan drops. Therefore, the closer it is to zero, the payout drops, too. The other type of mortgage life insurance is called level term insurance. With this kind of policy, the payout doesn’t decrease.
How Does Mortgage Protection Insurance Work
Mortgage protection insurance operates like term life insuranceyou make premium payments for the duration of the policy term and are only covered while the policy is in place. Many insurers issue policies that are the same length as the term of the covered mortgage, but policies may be available in five- or ten-year increments. Once you reach the end of the term, you are no longer covered.
If you die during the coverage period, the death benefit is paid to the mortgage lender. Your loved ones will not directly receive any of the proceeds from the policy, but the policy will pay the mortgage in full so they do not have to worry about making house payments. Some mortgage protection policies also cover mortgage payments for a set period if you become unemployed or disabled.
Don’t confuse mortgage protection insurance with other forms of mortgage insurance. The other types work to protect the lender if you default on the loan and are usually mandatory if you make a low down payment. They won’t benefit your family if you pass away before your mortgage is paid in full. These types of mortgage insurance are:
There’s also homeowners insurance, which is another type of policy that covers your home and the personal property within it in cases of natural disasters, accidents, theft and other events.
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Do I Need Life Insurance
YES probably! Do you have a loved one, do you have children, do you owe money to the bank, if so we highly recommend you have life insurance.
We believe that if you have people that depend on you financially, such as children or a partner who relies on you financially then life insurance could be a way of helping to protect them. We insure every material possession we own, with car insurance, mobile phone insurance, pet insurance, home insurance. We believe the most important insurance if on your life.
Is Mortgage Protection The Same Thing As Life Insurance
Yes and no. Like life insurance, mortgage protection policies pay out a benefit when the policyholder dies, but the beneficiary is always the mortgage lender â not your family or some other beneficiary who you designate. It’s helpful to consider mortgage protection as a limited type of life insurance with more specific rules about who and how much is paid by the policy.
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What Can I Use Life Insurance For
Raising a child is one of the obvious reasons people start to think about life insurance. After all, what is life insurance for if not to protect families? But its not the only reason you should think about getting cover. If you live with your partner and they would struggle to pay the mortgage if you were to die, then you should consider life insurance.
A Life Insurance policy could be suitable if you have an interest only mortgage, as the cash sum that could be paid out could help to pay off the mortgage. Or it could also be used to help your family with everyday living expenses.
Please remember that life insurance is not a savings or investment product and has no cash value unless a valid claim is made.
Single Or Joint Policy
Usually when people have a joint mortgage, they take out a joint life insurance policy, but you can get a single policy just for yourself.
A joint policy can be used to pay off the mortgage when one person dies, but it will only pay out once. While this can seem the cheaper option, bear in mind that having two single policies means that two lump sums could be paid out.
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What’s The Difference Between Life Insurance And Over 50 Life Insurance
The main difference is that life insurance is a term policy, so it covers you for a specific amount of time, while over 50 life insurance is a whole of life policy, so it covers you for the rest of your life.
To take out our Over 50 Life Insurance you need to be aged between 50 and 80. Your premiums are fixed for life, and you wont need a medical or health check. You can choose a cover amount to help pay for a funeral, or it can be used for other costs, or to leave a gift to your partner or family. Once youve had your policy for 30 years, or from the soonest policy anniversary after your;90th birthday, youll no longer pay anything, but your cover will continue. It cant be taken out as a joint policy.
With our Life Insurance Plan, you need to be aged between 18 and 89 to apply, and your cover stops at the end of the policy term. You choose a cover amount, and if you want your cover to remain the same, be protected from the effects of inflation, or decrease over time broadly in line with a repayment mortgage or loan. You can take out a single or joint life insurance policy.
If youre not sure which one might be right for you, speak to a financial adviser.;
Disclose All Health Conditions And Risks When You Apply Or Your Insurer May Not Pay Out
It’s important you’re open and honest with any information you provide, to ensure any policy that’s set up for is fit for your needs and will cover you if the worst were to happen and your dependants needed to make a claim.;
Likely things you’ll need to disclose when getting a quote for a policy include your age, whether you smoke, your occupation and your health history. The insurer then uses this information to determine whether it will cover you and a price.;
If you’re comparing quotes yourself via a discount broker, you’ll usually answer a few basic questions to see initial prices, but will then have to disclose much more detailed information if you then go through to the insurer to apply, which could affect the price/the decision to insure you.;
As each insurer has its own rules on pre-existing medical conditions, if you’ve a complicated medical history, it’s worth;getting advice before you buy. This is helpful as brokers tend to know;which insurers will cover your condition, and at the best rates.
If you’re over 50, you can get a policy with guaranteed acceptance; but it’s much more expensive;
If you don’t want to disclose health issues and are 50 or over, an over-50 policy is an alternative which doesn’t require any health questions and there’s guaranteed acceptance up to age 80 or 85. Yet to compensate these are much more expensive, you can’t claim in the first one or two years and you could get back less than you pay in.
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How Long Does A Life Insurance Investigation Take
When you file a life insurance claim, your provider starts an investigation that can take anywhere from days to months. It begins with the insurer gathering all the necessary paperwork. Most companies require all paperwork to be submitted between 90 days and 12 months following an individuals death. The Canadian Life and Health Insurance Association reports that, on average, most payments take about 7 to 10 days to be issued after the paperwork is received.
Is Terminal Illness Cover Included In A Life Insurance Policy
Yes, our Life Insurance Plan includes terminal illness benefit. This means well pay out if youre diagnosed with a terminal illness that meets our policy conditions within the policy term and aren’t expected to live longer than 12 months. Once we pay a terminal illness benefit, the life insurance policy ends, and we wont pay out when you die. Theres no cash value at any time.
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How Does Mortgage Life Insurance Work
When taking out a mortgage life insurance policy, youll:
- Choose the amount of cover you need. This will be the amount you owe on your mortgage.
- Choose how long you want your cover to last. This should be the same length as your mortgage.
- Well then show you our best deals for the amount of cover you need. Simply choose the one that best suits your needs.
Once youve applied and been accepted, youll start paying your monthly premiums.
If you die during the cover term, your policy will pay out however much is left on your mortgage. This amount will go to the people you name as your beneficiaries, wholl be able to use that amount to cover your mortgage.
Mortgage Life Insurance Rates
Mortgage life insurance rates change from year to year. But the table below gives you an example of mortgage life insurance premiums based on TDâs rates in 2020. This table shows the monthly mortgage life insurance rate based on age at the time of application and mortgage amount.
As you can see, the mortgage life insurance rates increase as your age and mortgage amount increase. For example, if youâre 30 years old and your mortgage is $250,000, youâll pay $25/month for mortgage life insurance.
However, if youâre 30 but have a $500,000 mortgage, youâll pay $50/month. Similarly, if you have a $250,000 mortgage but youâre 40 years old, youâll pay $52.50/month.
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What Happens To My Mortgage Life Insurance Policy If My Circumstances Change
Few people who take out a 25-year mortgage end up paying off the same loan a quarter of a century later.;
You might, for example, be landed with a loan at a higher interest rate after your initial deal ends, or with a bigger mortgage after moving house. Equally, you might end up with a smaller mortgage if you downsize or make overpayments.
Suddenly, the mortgage life insurance policy that was perfect at the start might not stretch far enough. Or it may be more expensive than you need.
Either way, if your circumstances change, review whether you still have adequate cover. Check how much extra it would cost to cover a larger mortgage.;
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With a smaller loan, you might even be able to get cheaper life cover, provided you are not significantly older and your health has not deteriorated.;
The biggest issue comes if you take out a joint life insurance policy and then split up or get divorced.
In this case, it can be expensive or impossible to remove one person from the cover unless you paid for a policy that allowed for separation. If you cancel the policy and buy new cover, the premiums might cost more given that you will be older and your health may not be as good.;;
The issue can be avoided by taking out single policies at the start one for each person. This may only cost slightly more than a joint policy.
How Mortgage Protection Insurance Works
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The promise of mortgage life insurance is simple and appealing when you die, your family can keep the house with its mortgage paid off. The reality is more complex. For many people, a normal policy is a better option than mortgage life insurance.
As the name implies, mortgage protection insurance is a policy that pays off the balance of your mortgage should you die. It often is sold through banks and mortgage lenders.
The reason lenders like mortgage life insurance is simple they’re the ones who get paid when you die. The death benefit of a normal life insurance policy goes to . But with a mortgage life insurance policy, the beneficiary is the lender, which will be paid the remaining balance of your mortgage.
That means your family only benefits indirectly. If you owe $150,000 on your mortgage, the mortgage protection policy will pay it off, and the property will be mortgage-free, but your family will have no say in how that money is spent.
Since your mortgage decreases over time as you make payments, that means the death benefit of your mortgage life insurance decreases, as well.
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Mortgage Protection Coverage Decreases Over Time
For many buyers, the mortgage life insurance payout amount declines over time. If youre wondering whether you still have to pay the same premium every month for a smaller face value, yes, you do if it has level premiums. That means the amount you pay every month does not change even if the value of the policy goes down.
What Does Life Insurance Cover
Its simple, you choose either a monthly amount you can afford, or a fixed sum that you would like to insure and this would be the insured amount. Depending if you choose level or decreasing cover, the amount insured will either stay the same for the term or decrease! Usually inline with your mortgage balance. You can discuss this with one of our advisors today.
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Mpi Vs Term Insurance: Which Is Better
A term policy is a good choice for many families because you can choose the amount of coverage, your beneficiaries, and what length your financial commitments are.
MPI is a better option than term life insurance when you cant qualify for it. This might happen if you have medical issues and need an exam.
Permanent Life Insurance Policy
Permanent life insurance is designed to accumulate a cash value over time. The more premiums you pay, the bigger that value is. Once it reaches a decent balance, you can tap that value and borrow against it just like you would a credit card or loan. And just like with these other types of financing, borrowing against your life insurance policy will cost you. Youll pay interest month over month until the debt is repaid.
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Definition Of Mortgage Protection Insurance
MPI is life insurance designed to provide a death benefit that pays a mortgage loan when a homeowner dies. Policies typically have a death benefit that matches the home loan, and the death benefit declines over time as you pay down your loan balance.
In addition to paying off a mortgage after the death of an insured borrower, some policies protect against a disability interfering with mortgage payments. In other words, if you cant earn an income, your insurance company can make monthly mortgage payments for you.