Mortgage Insurance - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

mac_gurl · 06-13-2007, 09:44 AM

I'm moving to a house in a couple of weeks, and we are going through a mortgage broker. He offered us insurance on the mortgage, but it seemed awfully high compared to what we pay now. We decided to look around. Does anyone have any suggestions as to other companies that provide insurance on a mortgage? Or for life insurance? And how much would life insurance cost for 2 - 25 year olds?
Thanks for the help!

ken0042 · 06-13-2007, 09:46 AM

Just to clarify- you aren't talking about CMHC, right? You mean life insurance in case something happens to you or your spouse, right?

mac_gurl · 06-13-2007, 09:47 AM

Ya, No CMHC, since we are putting more than 25% down. We need insurance that will cover the mortgage in the even that something happens to one of us.

Sylvanfan · 06-13-2007, 09:49 AM

Pretty much any insurance company can sell you life, or Mortgage life insurance. Manulife is who CIBC contracts to do their insurance. I guess with todays Mortgage amounts those insurance premiums are what $45-50 a month, maybe even 60? You might be better off to look at something like a life policy that wouldn't cover the entire mortgage, but would cover a good chunk of it so that should something happen the surviving spouse could still get by.

photon · 06-13-2007, 09:51 AM

If you're young and healthy typically having standard life insurance large enough to cover your mortgage should be cheaper than getting the insurance from the mortgage vendor.

If you already have life insurance, talk to them about it. I don't know if you can increase the amount of a policy, or if you have to get a new policy for the new amount.

jam26 · 06-13-2007, 09:52 AM

I just switched my mortgage insurance ($48/month for $277,000 mortgage) for a life insurance policy that covers both of us at $500K and costs about the same. Premium is locked in for 20 years.
Life insurance gives you more flexibility as you don't necessarily have to use it to pay the mortgage off. I shopped around and found general life insurance coverage for more than the value of the home could be had for less money and provides more flexibility. That's my experience anyway.

Nikki · 06-13-2007, 10:21 AM

I agree with what everyone has said. I just want to add that one other benefit is if you go with a policy, you have it for as long as you wish and are not having to re-apply if/when you switch your mortgage. It is a good investment versus paying the mortgage insurance and when you switch banks/change your mortgage, you have nothing to show for it.

Ford Prefect · 06-13-2007, 10:38 AM

Life insurance is the route we've gone too, for all the reasons already listed. It's just a better way to go all around.

fredr123 · 06-13-2007, 11:19 AM

Is it not the case that, in the event of your demise, the mortgage insurance proceeds are paid out to the lender to cover the outstanding principal? I was always under the impression that that is how it works.

Personally, I would rather have my money going to my spouse and family to do with it as they see fit. If my life insurance payout was sufficient to cover the mortgage principal and take care of my family then I would feel more comfortable with that.

Fozzie_DeBear · 06-13-2007, 12:04 PM

Also, the value of the mortgage insurance decreases with every bit of equity that you pay off (since it covers the balance of the mortgage). Whereas the life insurance remains a constant...

shane_c · 06-13-2007, 01:21 PM

It's been lowered to 20% now to avoid CMHC/Genworth

Slava · 06-13-2007, 01:31 PM

I am a fully accredited insurance advisor. There are a number of reasons to not buy the lenders coverage:

1. The coverage is decreasing, but based on the amount of the initial mortgage (in other words you pay the same premium, but as your mortgage decreases you don't get any extra benefit)

2. The coverage really protects the lender: If you were to pass on the lender has the mortgage paid out even though you've been paying the premiums....with a stand-alone policy your beneficiary gets the cheque, tax-free, and can do what they want. People don't always want to pay off the mortgage.

3. Once you have a stand-alone policy you can move and not have to re-apply. This is important because you could have health issues in the interim which will increase your rates, or deny coverage for you outright.

4. In the same vein, you have coverage no matter what the term of the mortgage is and you don't need to re-apply. As you age the premiums stay level and are based on your age today. A huge advantage if you renew your mortgage insurance 4-5 times over the course of your amortization.

I hope that this helps! I sent a PM as well. If anyone has any questions or would like information regarding any insurance (not auto or property) I would be happy to help. I can give you information on Critical Illness, Disability and Life insurance. Both from a personal and corporate point of view.

ken0042 · 06-13-2007, 01:39 PM

Good advice Slava.

It's also good to note that different insurance products are better suited for different people. My sister almost flipped on me when I told her I didn't have mortgage insurance, but then I reminded her that if I were to die it wouldn't matter as I am single, and have nobody depending on me. The bottom line is my parents would still get 6 figures from selling my house and keeping the excess for themselves.

However I have maxed out my disability/illness insurance. Because let's say I become paralized or something, there is nobody to care for me if I can't work. In a married situation; although you may count on two paycheques, it is possible to scrape by with just one.

Slava · 06-13-2007, 04:12 PM

Quote:

Originally Posted by ken0042

Good advice Slava.

It's also good to note that different insurance products are better suited for different people. My sister almost flipped on me when I told her I didn't have mortgage insurance, but then I reminded her that if I were to die it wouldn't matter as I am single, and have nobody depending on me. The bottom line is my parents would still get 6 figures from selling my house and keeping the excess for themselves.

However I have maxed out my disability/illness insurance. Because let's say I become paralized or something, there is nobody to care for me if I can't work. In a married situation; although you may count on two paycheques, it is possible to scrape by with just one.

That bolded statement is bang on!

MoneyGuy · 06-13-2007, 04:19 PM

Quote:

Originally Posted by Slava

I am a fully accredited insurance advisor. There are a number of reasons to not buy the lenders coverage:

1. The coverage is decreasing, but based on the amount of the initial mortgage (in other words you pay the same premium, but as your mortgage decreases you don't get any extra benefit)

2. The coverage really protects the lender: If you were to pass on the lender has the mortgage paid out even though you've been paying the premiums....with a stand-alone policy your beneficiary gets the cheque, tax-free, and can do what they want. People don't always want to pay off the mortgage.

3. Once you have a stand-alone policy you can move and not have to re-apply. This is important because you could have health issues in the interim which will increase your rates, or deny coverage for you outright.

4. In the same vein, you have coverage no matter what the term of the mortgage is and you don't need to re-apply. As you age the premiums stay level and are based on your age today. A huge advantage if you renew your mortgage insurance 4-5 times over the course of your amortization.

I hope that this helps! I sent a PM as well. If anyone has any questions or would like information regarding any insurance (not auto or property) I would be happy to help. I can give you information on Critical Illness, Disability and Life insurance. Both from a personal and corporate point of view.

I'm a certified financial planner and Slava is right on all counts. Here's one more. Mortgage insurance sometimes doesn't pay out. Why? Because it's underwritten at the time of claim, unlike life insurance which is underwritten at the time of application. I have an article from the Ottawa Citizen about two older ladies who hubbies died and their mortgage insurance didn't pay off the mortgage because of this. I read somewhere once that it's possible that up to about 20% of mortgage insurance policies don't pay out at the time of claim. I can't vouch for the accuracy of those percentages.

Do not buy mortgage insurance. However, you need to also understand that mortgage insurance usually includes life and disabiity insurance. Don't necessarily buy life insurance and think you've eliminated the need for disability insurance. Actually, for most people here DI is probably your greatest insurance need. It's expensive, but that's because you're probably more likely to cash in a DI policy than you are life insurance. IOW, you're probably much more likely to suffer a sustained disability than you are to die, and it could last for years.

Mortgage life insurance is a form of group insurance. That means that applicants are all lumped together for calculating premiums. If you're younger and in good health, how do you feel about having some fat, artery-clogged smoker having his premiums subsidized by you? Ah, I thought not.

A problem with the disability part of mortgage insurance is that if you are disabled, it only pays the mortgage payments. What about your other expenses? I assume you'll still need to eat.

You also need to review all of your insurance requirements.

You've had some good advice on this thread. I think you know what to do.