Case Study #: 37 Year Old Man Needs Mortgage Insurance To Cover A $500000 Mortgage
Now, for a younger person, say a 37 year old non-smoker, male, preferred rating, with a $500,000 mortgage, we find that the old-fashioned policy for $500,000 America General Term policy for 30 years will cost almost $52/month for a total of $18,652 over the life of the policy.
However the Protective Mortgage plan would cost only $44.57/month for a total of $16,045 over the course of 30 years. Any way you slice it, the Protective Mortgage Protection plan is a winner!How Much is Mortgage Protection Insurance Per Month?
If you want a quote from us for straight term, , please see our Life Insurance Rates by Age page, where we offer free ballpark quotes, with no personal information required.
However, if youd like to protect your mortgage with our new Protective strategy, youll need to call us directly at 888-603-2876 for a customized quote, as our quoter is unable to handle these customized rates at this point.
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Is Disability Insurance Worth It
If you rely on your income to survive and dont have substantial savings, a disability insurance policy can offer peace of mind. If you become disabled and can no longer work, your coverage will kick in to replace part of your income so you can cover your living and medical expenses.
The best type of policy for you depends on your financial situation. Short-term disability insurance can replace a large percentage of your salary, but the benefit period is limited. As such, it suits those who dont have an emergency savings fund to fall back on.
On the other hand, long-term disability insurance lasts several years or even until retirement, when CPP steps in. The list of covered illnesses and injuries is far more comprehensive, and includes the likes of arthritis, back pain and heart disease. However, its usually more expensive, so factor that into your decision.
Why You Dont Need Mortgage Life Insurance
So you’ve closed on your mortgage. Congratulations! You’re now a homeowner. This is one of the biggest investments you’ll make in your life. And because of the time and money you’ve invested, it’s also one of the most important steps you’ll take in your lifetime. As such, you’ll want to make sure that your dependents are covered in case you die before you pay off your mortgage. One option you have available to you is mortgage life insurance. But do you really need this product? Keep reading to find out more about mortgage life insurance and why it may be an unnecessary expense.
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Rbc Royal Bank Homeprotector Insurance Options At A Glance:
- Life insurance pays off or reduces your mortgage balance if you pass away.
- Life insurance also covers prepayment charges, any overdrawn property tax account balance and any âcash back optionâ penalty amounts you owe, if you pass away.
- Critical illness insurance pays a lump sum to your mortgage balance if you are diagnosed with a life-altering critical illness.
- Disability insurance maintains your mortgage payments if you are disabled and unable to work due to an illness or an injury.
Note: Life Insurance is part of all coverage plans. You cannot be insured for both critical illness and disability insurance at the same time on the same mortgage.
A Historic Opportunity To Potentially Save Thousands On Your Mortgage
Chances are, interest rates won’t stay put at multi-decade lows for much longer. That’s why taking action today is crucial, whether you’re wanting to refinance and cut your mortgage payment or you’re ready to pull the trigger on a new home purchase.
The Ascent’s in-house mortgages expert recommends this company to find a low rate – and in fact he used them himself to refi . and see your rate. While it doesn’t influence our opinions of products, we do receive compensation from partners whose offers appear here. We’re on your side, always. See The Ascent’s full advertiser disclosure here.
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Mortgage Life Insurance Benefits
Mortgage life insurance may benefit people who don’t qualify for term life insurance because of poor health since this kind of policy is typically sold without underwriting. But like any other policy, candidates should seek quotes from several companies and check each firm’s financial strength rating with AM Best, a rating company that ranks insurers with letter grades.
Those who want to avoid declining-payout policies should opt for no-medical-exam term policies with level premiums and level death benefits. Although these policies cost more and may offer lower coverage than term policies that review medical histories and conduct physical exams, at least theyll pay the same benefit, whether you die 10 or 25 years into your mortgage.
Another possibility is to acquire a policy that offers more coverage for a cheaper price earlier in your mortgage term. Once youve paid down the principal significantly, consider switching to a guaranteed issue term policy.
Some policies may return your premiums if you never file a claim after you pay off your mortgage. However, the premiums returned to you will likely be worth far less, as inflation erodes their value. Plus, you will have likely squandered the chance to invest any money you would have saved, had you purchased cheaper term life insurance.
Mortgage Disability And Critical Illness Insurance
Mortgage disability and critical illness insurance may make mortgage payments to your lender if you can’t work due to a severe injury or illness.
Mortgage disability and critical illness insurance is usually a combination of several insurance products, including:
- critical illness insurance
- job loss insurance
- life insurance
Most insurance plans have a number of conditions attached to them, including a specific list of illnesses or injuries that are covered or excluded. Pre-existing medical conditions are usually not covered. These terms and conditions of insurance are listed in the insurance certificate. Ask to see the insurance certificate before you apply, so you understand what the insurance covers.
Before you buy mortgage disability or critical illness insurance, check if you already have insurance coverage that meets your needs through your employer or another policy.
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Advantages Of Mortgage Life Insurance
One of the convenient things about mortgage life insurance is that its easy to get. Anyone can buy a policy and typically no medical exam is required in the underwriting process. This is especially helpful for someone with a pre-existing condition or an illness that either disqualifies them from other types of life insurance or pushes their life insurance rates up to an unaffordable level.
If the policy offers affordable premiums, mortgage life insurance also might be a good way to supplement your other life insurance coverage. If you have a policy in place to pay off your mortgage balance, your loved ones can then use the payout from your other life insurance policy toward other expenses.
To recap, mortgage life insurance pros:
- No medical exam required
- Most people can qualify, which generally makes it a good option for those who have pre-existing health conditions or who have been declined life insurance coverage in the past
- If the premiums are reasonable, mortgage protection insurance could be a good supplement to life insurance coverage you already have
What Is Mortgage Life Insurance
Mortgage life insurance is a special type of insurance policy offered by banks that are affiliated with lenders and by independent insurance companies. But it’s not like other life insurance policies. Rather than paying out a death benefit to your beneficiaries after you die as traditional life insurance does, mortgage life insurance only pays off a mortgage when the borrower dies as long as the loan still exists. This is a big benefit to your heirs if you die and leave behind a balance on your mortgage. But if there’s no mortgage, there’s no payoff.
One thing to keep in mind: don’t confuse mortgage life insurance with mortgage insurance. The latter is private insurance that must be taken out as a condition of some conventional mortgages. While mortgage life insurance can protect youthe borrowerand their heirs, mortgage insurance protects the lender if the mortgagor isn’t able to fulfill their financial obligations. Premiums are either paid separately or are rolled into the borrower’s regular monthly mortgage payment.
Mortgage life insurance is not mortgage insurancethe latter protects the lender in case the borrower defaults on their mortgage loan for any reason.
Once you’ve closed on your loan, be on the lookout for regular mailouts and phone calls trying to sell you a mortgage life insurance policy. These solicitations are often disguised as official requests from mortgage lenders. Documents often lead with alarming headers like:
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Protection For The Home You And Your Family Love
Buying a home is a tremendous achievement. Itâs also one of the biggest financial commitments youâll ever make, which is why itâs important to make sure you or your family will be able to continue to make your mortgage payments in the event of death, disability or a critical illness.
Your Home, Your Lifestyle
When you chose your home, you chose a neighbourhood to live in and schools to send your kids to.
â¦you chose a lifestyle for your family,
â¦and there is a way to help protect it.
Right now, your finances and mortgage add up nicely.
But what if you got sick or hurt, and were suddenly unable to work?
That means any additional income is preserved to take care of your other expenses.
You canât predict the future, but you can help to ensure that once youâre in your new home, youâll stay there, with a protected mortgage balance from RBC.
HomeProtector insurance is an optional creditorâs group insurance program, underwritten by The Canada Life Assurance Company, and is subject to terms, conditions, exclusions and eligibility restrictions. Benefit maximums: life coverageâthe outstanding balance of your mortgage to a maximum of $750,000, disability coverageâyour regular mortgage payment to a maximum of $3,000 monthly for up to 24 months, critical illness coverageâthe outstanding balance of your mortgage to a maximum of $300,000.
Level Term Life Insurance
Most agents are now selling level term life insurance policies to clients looking for mortgage protection.
this was the second old-fashioned type of mortgage life insurance we discussed above.
This is not a bad solution, because it will provide enough coverage to pay off the mortgage should the insured die before its paid off. The excess death benefit can be used by the beneficiary for other needs and expenses at their discretion.
This policy does not decline, so the value of the purchase remains constant. So it is indeed a better choice than the old-fashioned mortgage protection insurance described above.
However, it may result in over-insurance, which can be costly if not needed. If the balance on your mortgage is only $14,242 when you die, and the death benefit is over $500,000, you may have been paying too much for more coverage than you need.
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Payment Of The Policy May Depend On How A Policyowner Dies
Some mortgage life insurance policies will only pay a death benefit if you die from an accident, similar to accidental death insurance. Regular life insurance has fewer exclusions usually suicide within the first two years or an illness that was intentionally not disclosed in the application process than mortgage life insurance on whether a policy will pay out death benefits.
Regular Or Own Occupation
The definition of “regular or own occupation” plan means you’ll receive benefits if you’re unable to perform the main duties of the job you had at the time the disability started.
You’ll still receive benefits even if you can work in a different job from the one you had before your disability, based on your training, experience and education. Some policies don’t allow you to get benefits, or may reduce your benefits, if you begin working in a different job.
In group policies, it’s common that policies have regular or own occupation plans for a specified period of time. At the end of the specified period of time, usually after the first 2 or 5 years, the disability policy will often change to the any occupation definition.
Own occupation plans that never change in definition are often purchased individually and usually cost more than any occupation plans.
You may want to consider an own occupation plan if you have a specialized occupation that would require you to take a significant pay cut in order to work in another field.
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Mortgage Life Insurance: Good Rates For Homeowners With Medical Issues
If you go through the process of applying for a mortgage, you may be offered mortgage life insurance by your lender or its partner companies. While it isn’t mandatory, mortgage life insurance offers enough coverage to pay off your mortgage so your family will not have to move if you pass away.
It Loses Value Right Away
With mortgage protection insurance, you’re essentially buying a life insurance policy that loses some of its value every year. That’s because your mortgage balance gets paid down over time.
Say you take out a $250,000 mortgage and you also buy mortgage protection insurance. You start out essentially paying for $250,000 in insurance protection. That’s what it would cost for the insurance company to pay off your loan balance if you died soon after borrowing.
But you’ll be steadily paying down your mortgage every year. Eventually, you’ll owe only $200,000, then $150,000, then $100,000, and so on. The value of your protection starts eroding when you make your first payment, but premiums for the insurance typically stay the same for the life of the loan. This isn’t a very good value for you.
Mortgage Protection Insurance: Does Every Homeowner Need It
Buying a home is a major financial commitment. Depending on the loan you choose, you might commit yourself to 30 years of payments. But what will happen to your home if you suddenly die or become too disabled to work?
Mortgage protection insurance can help your family cover your mortgage under certain circumstances you can avoid foreclosure if you can no longer work to pay your mortgage.
Lets take a closer look at what MPI is, what it covers and who might need a policy.
What Is Mortgage Protection Insurance
Your home is one of the biggest investments youll ever make, which is why families carrying a mortgage often purchase mortgage disability and/or life insurance. If one of the breadwinners dies or becomes disabled, a mortgage protection insurance payout can help the family keep up with mortgage payments and stay in their home.
Mortgage life or disability insurance, also called mortgage protection insurance, can be a way to pay off a mortgage, but it doesnt take the place of regular life insurance.
How Mortgage Protection Insurance Works
As the names imply, mortgage life insurance is a policy that pays off the balance of your mortgage should you die and mortgage disability insurance makes a monthly disability payment toward your mortgage should you become disabled. Mortgage protection insurance is sold through banks and mortgage lenders, including Citizens State Bank.
The biggest benefit of mortgage protection insurance is convenience as theres often no medical exam required to buy a policy. If youre denied term or whole life insurance because of medical conditions, a mortgage protection policy may be an option to financially protect your home.
Mortgage life and disability insurance can also act as a supplement to your other insurance policies you know your mortgage is being paid while you use proceeds from your other policies to cover other expenses.
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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.
How Much Will I Pay For These Benefits
Your VMLI premium will be based on all of these factors:
- Your age, and
- The current balance of your mortgage loan, and
- How many more mortgage payments you need to make to pay off your mortgage, and
- The amount of VMLI coverage you need
Use our VMLI Premium Calculator to figure out what your premium may be. Go to the VMLI Premium Calculator
What’s The Difference Between Mortgage Protection And Private Mortgage Insurance
Mortgage protection is an optional purchase that guards you against the possibility that you might not be around to pay off your family’s mortgage. Private mortgage insurance is a coverage that lenders require when your down payment is below 20%, and it protects the lender in case you default.
Editorial Note: The content of this article is based on the authorâs opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
How Does Mortgage Disability Insurance Work
Mortgage disability insurance can either be bought as a standalone policy, or as a rider on a mortgage life insurance policy. Once youre diagnosed with a disability, either temporary or permanent, your policy will start paying a portion of your mortgage payment each month.
The policy typically has a 30- or 60-day waiting period, which means youll be responsible for paying the first or second months mortgage payments after your disability diagnosis. Once the policy kicks in, the insurance company will directly pay your mortgage company, meaning you wont see the money but your payments will be made.
The standard length of coverage on a mortgage disability insurance plan is one to three years, which is the most common amount of time for people to recover from a disability, or find alternative ways to pay for a mortgage.