People can be put off by the cost of mortgage protection insurance but this can be made more affordable with a little planning. Especially when it’s specifically designed to accommodate other potential sources of income, such as sick leave, vacation savings, and savings for emergencies.
Mortgage protection insurance differs from a lot of types of critical illness coverages, in that it is more comprehensive and does not limit your insurance coverage to a specific list of conditions. As a registered financial advisor, I think of the following when trying to make mortgage protection insurance premiums more affordable for a family.
1. Payment Terms
A “payment term” is the length of time that the insurance company will continue to make monthly payments to your family while you are sick and unable to work.
Dropping this payment term reduces the premiums. This is really only ideal if you think you will be able to make other arrangements to deal with the long-term disability. Lower payment terms can be used in conjunction with Permanent Total Disability to reduce some of the risks. Permanent Total Disability coverage is a type of insurance that pays a lump sum in case you are unable to work again. I tend to quote insurance premiums with the term of payment fixed at retirement age (65).
2. The waiting period
if you become ill and are no longer able to work; The “waiting period” is the amount of time you must wait before receiving your first payment from the insurance company. Increasing the waiting period to thirteen weeks can significantly reduce your premiums.
This can be a good way to cut costs if you can manage your financial obligations at the beginning of losing income due to illness. Vacations and sick leave from your employer can help tie you down while you wait for your down payment as well as any savings. Note – If you have this type of coverage, be sure to check if your claims will be paid in advance or in arrears, this could mean a 1 month difference with some covers.
3. The amount of coverage
You do not have to cover the entire amount of your mortgage if you feel there will be other family income that will continue in the event that you are unable to work due to illness. Extended families sharing expenses and/or spouses could consider this in addition to those with other income-generating investments. Also, remember that when you take out mortgage payment insurance, your ACC is not compensated. Meaning, you can claim Mortgage Protection Insurance if you receive ACC payments due to an accident.
Because each of these components can have a significant impact on when and if the worst happens, it’s important to discuss them with your financial advisor before putting the plan into action.
Many features and options are only available according to your health at the time of application. So it is important to consider getting what you may need in the long run now. For many people when symptoms of the disease begin; Initiating some of these features may not be an option.