Adèle Manseau | Desjardins Group
You're getting ready to make the biggest purchase of your life and you've got a lot on your mind. There are so many questions--should you insure your mortgage? Is it really necessary? What's the best way to go?
According to Étienne Martel-Octeau, a Desjardins specialist on loan insurance, those are all good questions to ask. He believes the key to finding the right answers is to make sure you're asking the right questions about what you need. Here are a few myths about loan insurance to get you thinking about what that means.
1. I already have life insurance, so I don't need coverage in case of death.
Start by going back to why you took out life insurance in the first place. What will your coverage do for you? In the event of your death, life insurance can help protect your family. And when you take out a mortgage, you're taking out the biggest loan of your life. It completely changes your financial situation and can create a financial burden when you're gone.
"The additional coverage provided by loan insurance can give your family financial security: in the event of your death, your mortgage would be paid off in full," explains Martel-Octeau.
2. I already have disability insurance, so I don't need coverage for disability.
"You might be covered, but will it be enough?" asks Martel-Octeau. "The answer is usually no, because this kind of insurance typically maxes out at 70% of your salary. So if you were disabled tomorrow, would money be tight?"
Remember that not only will you have to cover your regular expenses with less, but your disability may create additional expenses. Your spouse might need to take time off work and you may need to pay for treatment, medication, parking, specialized transit--the list goes on. Your income shrinks while your expenses grow. Disability insurance on your mortgage would help you breathe easier by covering your loan payments.
3. I'm young and I'm healthy; I don't need insurance.
"1 in 9 of our disability claimants is under the age of 30. Whatever your age, you likely know someone who has had a critical illness. Nobody is invincible. We can't protect ourselves against everything, but the benefit of being young is that your insurance will be cheaper," explains Martel-Octeau.
Plus, it's not just getting sick that you need to think about: accidents happen, too. When you're young and something goes wrong, you might bounce back easier, but your wallet might not. When you're just starting out, having insurance can help keep you from getting into financial trouble.
4. Loan insurance is too expensive.
All insurance is too expensive--until you end up needing it. What's great about loan insurance is that your premium is never higher than it needs to be: as your mortgage balance drops, so does your premium.
"If someone offers you a product for less, make sure you know what the catch is--for example, a shorter disability benefits period. I know it's a cliché, but if it sounds too good to be true, it probably is," says Martel-Octeau. "Your mortgage is likely the biggest expense in your budget. If you pass on insurance, you're taking a chance if something goes wrong."
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