Financially Speaking

Keeping a roof over your heard, no matter what

An empty house can seem sad and lonely.  But a home – that’s different.  It’s your place, an architectural shell you’ve filled with the beauty of life, the emotion of living.  And, whether it’s your first home or your dream home, the most important fact is it’s your home.

At least, it is your home for as long as you continue to pay the mortgage.  That’s why you budget carefully and make those mortgage payments each month.  But, what if you couldn’t?  What if sickness, injury or death made it impossible to keep up with the mortgage payments?  Would your family be able to stay in their home?

Fortunately there are ways to ensure your family will always have a roof over their head, regardless of what happens to you.  But5, what’s best for your situation?  Let’s take a look.

Traditional mortgage insurance will pay off the total outstanding amount of your mortgage when you die.  Most lending institutions offer mortgage insurance as part of their mortgage options and they’ll usually integrate the premiums into your total mortgage payments.  But, this type of insurance often does more to protect the lender than you.

For starters, your lender owns the policy and if you find a better mortgage rate at another lending institution, your mortgage insurance usually can’t be moved to the new institution, and you may have to requalify medically for the new protection.  Lender provided mortgage insurance is set at the amount of your mortgage and generally decreases as you pay off your mortgage – so you end up paying the same premium for less coverage.  If anything happens to you, the death benefit is payable to the lender, not your family.  And renewal rates aren’t guaranteed.

A personal life insurance policy insures you, not your mortgage.  You determine the amount of coverage you want – it’s not tied to the value of your mortgage.  You own the policy so you have the freedom to name your beneficiaries and they can choose how to use the proceeds.  You can switch to another lending institution without jeopardizing your coverage and your coverage doesn’t decrease as your mortgage is paid down, which means that for every dollar of mortgage principal repaid, there will be additional proceeds available to your family at a time when they may need them the most.  Also, your policy can be customized with the options and features you choose, which may include having your premiums waived if you become disabled.

Disability insurance protects your ability to continue to make mortgage payments by providing money if you can’t work.  You may have a group plan at work that includes disability insurance.  But, group coverage ceases when you leave your job and if you’re self-employed you may not have a plan.  A group plan may also have limits on payouts and may narrowly define the term “disability” which could require you to relinquish payments or return to work prematurely.  A personal disability plan can supplement other disability benefits in ways that make sense for you.

Critical illness insurance generally pays you a one-time lump sum benefit amount if you are diagnosed with a critical illness or condition as defined in your policy.  Critical illness insurance is not tied to a mortgage or any other personal or business loan.  You usually can use the benefit to help pay off your outstanding mortgage loan, make payments while you recover, or for any other personal or business need.

If you want your home to be a secure haven no matter what happens to you, having enough insurance to cover your mortgage debt is essential.  And if you want to be able to maintain your family’s lifestyle come.