The word ripoff is a very strong word, however, if you were to ask me if Mortgage Insurance is a good deal, I would generally say no. If you are a non-smoker, Mortgage Insurance would end up costing you more as opposed to an Individual Plan.
There is a good side to Mortgage Insurance. For example, if you are a smoker, the rates for Mortgage Insurance may actually be less. If you have any health conditions, it is best to cancel your Individual Plan before applying for Mortgage Insurance.
Life Insurance Canada News:
Mortgages now a day are seen as nearly lifelong payments that never dissipate. With the cost of owning a home at an all time high, many people find themselves unable to pay off their mortgage as quickly as they presumed. In fact, the average mortgage loan term is 25 years – 10-15 years if you are lucky. Sean Cooper, however, managed to pay off his mortgage in an astounding 3 years! Sounds nearly impossible, but he certainly made it happen.
Sean Cooper, Personal Finance Journalist and Author of Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, shared his journey through his mortgage process; from the time he bought his first home, to when he burned those mortgage papers in relief. The question on everyone’s mind, how did he manage to pay off his mortgage in just 3 years?
There are no secrets and no gimmicks to how Sean Cooper managed to pay his mortgage off in a span of 3 years. The key to his successful mortgage move was simply hard work. Sean purchased his first house at the age of 27 and knew he wanted to minimize the duration of his mortgage payments. In his book, he discussed how he worked up to 100 hours a week at 3 jobs: financial writer, pension analyst, and supermarket clerk. Between a full-time job and two part-time jobs, Cooper managed to make just over 6 figures a year which he devoted to paying off his $255,000 mortgage.
Giving up luxuries such as driving, fine dining, and time, was no doubt difficult for Sean, but he does exude confidence in his ability to see past such luxuries.
"You don't necessarily need to pay down your mortgage in three years like me. You don't need to eat Kraft dinner. That was just my path to financial freedom.”
Sean Cooper is confident in what he has done and he shares, in detail, his path in his book. Understanding the market, he knows the importance of paying off such a huge debt in such a small amount of time. There are, of course, those who are against his actions. There are some who believe he went beyond the realms of frugal, but Sean is certainly not remorseful about what he has accomplished. He knows his story will help those who see their mortgage as a never ending burden.
Sean continues to work at a Personal Finance Journalist, aiding those to accomplish their financial goals. The main message of his book goes beyond the surface of paying off a mortgage in 3 years, but rather what it took to achieve that. There are no gimmicks or tricks to paying off a mortgage, it all comes down to how badly you want it and how hard you are willing to work to ensure your financial success.
A little over a year ago, I achieved financial freedom when I paid off my 30-year mortgage in just 3 years by age 30. I celebrated by burning my mortgage papers on national T.V. My story went viral, making headlines around the world.
I received dozens of emails both congratulating me and wanting to follow in my footsteps. This inspired me to write my new book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. With home prices skyrocketing in cities like Toronto and Vancouver, many feel like the dream of homeownership is out of reach. I'm here to tell you that it's not. I may have paid off my mortgage in 3 years, but that doesn't mean you have to. There are simple yet effective lifestyle changes that anyone - from new buyers to experienced homeowners - can make to pay their mortgage sooner.
Although many Canadians have a mortgage, mortgage insurance remains an often misunderstood topic. I discuss mortgage insurance in my book. Here is a brief Q&A with my thoughts on why individual life insurance is generally a better deal than mortgage insurance through a lender.
1) What are some of the differences between individual life insurance and mortgage insurance through a bank?
One of the benefits lenders like to boast about mortgage insurance is that your premiums stay the same over the life of your mortgage. While that may sound good on paper, you're actually paying the same premiums for less coverage. For example, let's say you start with a $450,000 mortgage and manage to pay off $100,000 in five years; your premiums stay the same, but your coverage has decreased by $100,000. That isn't the case with individual life insurance. For instance, with term insurance, your coverage remains the same as long as you continue to pay your premiums.
With individual life insurance, you can choose you beneficiaries (i.e., your spouse, children, or estate). With mortgage insurance, you can't. Your beneficiary is your lender. While mortgage insurance can only be used to pay off the remaining balance on your mortgage, with individual life insurance your spouse can use it as she/he sees fit - to pay off your mortgage, help fund your children's education or to take time away from work.
2) Expand on the concept of Portability
In my book, I encourage homeowners to shop around for to six months before their mortgage comes up for renewal. If you find a better mortgage elsewhere and decide to switch lenders, if you have mortgage insurance, it doesn't automatically come with you. In fact, you'll have to re-qualify for coverage with your new lender. You'll need to provide new medical evidence and could end up paying higher premiums. Your coverage could even be denied if you're diagnosed with an illness such as diabetes. Also, if you pay off your mortgage like me, with mortgage insurance your coverage ends.
Individual life insurance is a lot more flexible. You can pay for coverage as long as you need it. For instance, until your kids grow up and are financially independent and your mortgage is paid off. As long as you keep paying your premiums, you won't have to re-qualify or prove your insurability.
3) Explain what is meant by Post Claim Underwriting
Post claim underwriting is another major drawback of mortgage insurance. Post claim underwriting is when your lender doesn't bother to check your medical history when you apply for mortgage insurance. Instead, they ask you to complete a medical questionnaire and decide if you qualify based on that. It isn't until you pass away that your lender takes a closer look into your medical history and may decide that you should have never qualified for coverage to begin with. Lenders to this to save time and money. This can be heartbreaking for families. Your loved ones will already be dealing with the emotional stress of your passing. Do you really want to add the financial stress of being denied for mortgage insurance?
That isn't a problem with individual life insurance. Underwriting is done at the time of application. If you don't qualify, at least you'll know upfront. It won't come as a shock to your loved ones later on.
4) What are some pitfalls people look at before cancelling their mortgage insurance?
There are some instances where signing up for mortgage insurance makes sense. For example, if you're buying a home and you intend to get individual life insurance later on, but it isn't in place yet, consider getting mortgage insurance until your individual life insurance is in place (you can always cancel mortgage insurance later).
If you're a smoker, you could pay a lower rate at the bank for mortgage insurance than individual life insurance because the banks often use blended smoker and non-smoker pricing.
As mentioned earlier, if you're suffering from health issues, you should be careful before cancelling your mortgage insurance coverage. Make sure you qualify for individual life insurance first.| one comment
Canadian insurance companies have developed insurance plans for all types of visitors to Canada. Whether you are a new immigrant, business traveler, visitor, foreign worker or student, there is an affordable life insurance plan designed to suit your needs.
Industrial Alliance, one of the largest companies in Canada (founded in 1892), has a long history of providing insurance products and financial services. The company offers coverage to anyone who has been in Canada for at least 6 months (regardless of their status). The maximum amount of coverage for a fully underwritten product is $100,000. However, 2 products are excluded – Life Serenity 65 and Child Life Health Duo. People with work permits or on a work visa may be eligible for a higher amount of coverage, depending on their situation.
The company also offers a No Medical Simplified Issue plan called Access Life, which will insure non-residents in Canada for up to $300,000 assuming the insured can answer “no” to all 15 health and lifestyle questions.
Canada Protection Plan, the leading No Medical and Simplified Issue insurance provider in the country, has a huge lineup of insurance products, including No Medical Simplified Issue plans, Term insurance and Permanent plans for non-residents. Non-residents in Canada can get up to $250,000 in life insurance coverage.
There are certain restrictions on who can apply for life insurance coverage, but if you fall into one of these categories, you may be eligible:
- Open work permit
- Students visa
- Convention refugee status
- Nannies or caregivers
- Temporary work visa
- Landed immigrants
- Investors, entrepreneurs and self-employed
Holders of a work permit may qualify for fully underwritten products from Assumption Life, such as FlexOptions, FlexTerm, ParPlus, Youth Plus and Critical Protection, for a maximum of $500,000 in coverage. Higher coverage amounts may be available. These cases are assessed on an individual basis and subject to review.
The applicant must provide a copy his work permit, valid for at least one year and not expiring within the next three months and been living in Canada for more than a year. Applicants that don't meet these requirements are subject to stricter screening and underwriting processes, such as paramedical and blood profiling, including tests for hepatitis B and C.
Foreign workers are not eligible for disability income, premium waivers or accidental death riders. Workers of all nationalities are eligible for Simplified issue products like Golden Protection, Total Protection and No Medical Insurance, but anyone considered a risk of returning to their country of origin will be closely scrutinized.
Studying in Canada
Holders of a study permit can qualify for fully underwritten products such as FlexOptions, FlexTerm, ParPlus, Youth Plus and Critical Protection for a maximum of $250,000 in coverage and may be eligible for the critical illness rider and the Accidental Fracture Plus rider. Married students with children may be eligible for the Child Insurance Benefit rider (CIB) if the spouse and children live in Canada and if the rider is offered on the selected product.
Foreign students are not eligible for disability income, premium waivers or accidental death riders. The applicant must be enrolled in a minimum six-month study program and provide proof of enrollment to confirm full-time attendance in a school, college or university. Anyone that doesn't meet regular underwriting requirements may qualify for other plans with stricter screening processes.
Foreigners With an Open Work Permit
Holders of an open work permit also qualify for fully underwritten life insurance plans up to a maximum of $500,000 in coverage. Requests for higher amounts are assessed on an individual basis. These applicants may be eligible for critical illness and Accidental Fracture Plus riders, as well.
All nationalities and all workers are eligible, however a copy of the open work permit must be provided.
Applicants that have been granted convention refugee status may obtain fully underwritten life insurance coverage up to a maximum of $250,000. They may also be eligible for critical illness and Accidental Fracture Plus riders.
Refugees are not eligible for Critical Protection, disability income, premium waivers or accidental death riders. To apply, refugees must have been living in Canada for six months or more, have a stable living environment and gainful employment. The applicant must also provide a copy of a permanent residence application and a copy of the letter from the Immigration and Refugee Board of Canada and from Citizenship and Immigration Canada verifying protected refugee status.
People with dual a citizenship (Canadian and American) may be eligible for fully underwritten life insurance products with no maximum, providing they can justify the amount requested. Nannies and caregivers can apply for up to $250,000 in coverage, but proof of employment from the nanny program must be provided.
Life insurance plans and eligibility requirements for non-residents are determined on a case-by-case basis. For more details on this, or any other insurance inquires, please contact us at 1-866-899-4849 or visit our Quote Page.
Big data has become a topic of great interest in the insurance industry over the past few years. Not just ordinary; the main focus has turned to big data. Responses from insurance companies indicate that harnessing the power of big data has become an important factor in the predictive analytics framework. This information can be a huge benefit regarding decisions about pricing, underwriting and the company's overall business strategy.
Most industries have already caught the Big Data bug and life insurance is no exception. The key is to extract useful insights, which requires the careful planning and execution of advanced analytical techniques and technologies. However, insurance companies need to have the right people, proper systems and the best processes in place in order to be successful.
Karen Cutler, Chief Underwriter at Manulife and a real proponent of how this technology is changing the industry says, “Through predictive analytics we understand our business better than ever. We expect to use analytics and modelling with our living benefits products in the future, but right now we are focusing on life insurance.”
P&C and Advanced Analytics
Property and casualty (P&C) insurance was one of the first in the industry to use advanced analytics for improved risk selection and to offer their clients new products. Auto insurance providers, for example, offer coverage on a usage base. Their technology monitors driving behaviour and rewards careful drivers with a discount on premiums. Tech-savvy Millennials find this idea particularly appealing, especially if they haven't yet established a good credit score or long good driving history.
With so much potential in this area, it will be very beneficial for life insurance providers to learn from the knowledge the P&C industry has acquired over the years. Of particular importance is how big data and predictive analytics can be best used and deployed. Some P&C insurance companies made huge initial investments on infrastructure and applications, before considering market deployment. Life insurance companies should first think about how these tools will be used, set their goals, chart their course and then invest in the areas they need to succeed.
Data sources already in use or in consideration include:
- credit scores
- administrative systems
- medical records
- claims data
- social media
- website clickstreams
Combating insurance fraud is another area the industry is using analytics. Canada’s main insurance providers have amassed huge amounts of data over generations, allowing them to spot questionable applicants. As Cutler explains, “The majority of people do provide full disclosure on their insurance applications. One of the biggest challenges we have found in North America over the years has been the issue of smoking disclosure and tobacco use. We use analytics to identify the people that have a high probability of being a smoker. Because of that, we need to test those people before offering insurance.”
Moving Towards the Future
While many life insurance companies are in the early stages, most expect big data and predictive analytics usage will dramatically increase over the next few years. Many life insurance companies also anticipate the expansion of data applications and new sources for data collection.
According to a Willis Towers Watson survey, only 8% of insurers are actively using the data they collect to assist in making important business decisions. Respondents expect this to change in a big way: 62% say they plan to take full advantage of big data and predictive analytics over the next two years to:
- expand relationships with customers
- transform business models
- improve internal performance management
- enhance the customer value proposition
The challenge for insurance companies is what data to collect, where to collect it and what to do with the information. Currently, administrative systems (claim data, agents, underwriting data and postal code) is the top data source. Although these will continue to be reliable sources, additional sources such as emails, websites and social media will also be used.
According to Lorne Marr, Founder and Director of New Business Development at LSM Insurance, implementing the use of big data and predictive analytics has a few pros and cons.
Benefit to Consumers
1) Reduce the cost / number of medical tests required. More and more insurance companies are reducing the number of intrusive tests. Numerous studies have shown Millennials are not fans of medical tests - they want everything done quickly and are not fans of huge delays.
2) Could reduce the cost to insurers which could be passed on to the policyholder.
3) Life Insurance policies should be issued quicker.
1) Many consumers have privacy concerns and do not like the increased use of outside data to assess insurance applications.
2) It may be more challenging to issue policies at preferred rates without the supporting medical tests - preferred rates can save consumers up to 35%.
3) This may lead to a higher number of claims being contested.
Today's Question: How long do I have to quit smoking before I can apply for an individual Life Insurance Policy?
You do not have to quit smoking in order to apply, but keep in mind that smokers do pay higher premiums than non-smokers. To apply as a non-smoker, however, the rule of thumb is 12 months where you have been smoke-free - including nicotine or nicotine substitute products.
For preferred rate plans, the period can be longer. What you want to do is talk to a broker who works with a plethora of companies and knows the protocols for all the carriers to ensure you get the pest policy for your situation.
**The following post is a guest blog from our friends at Ratehub.ca**
The truth is, there’s no “right” answer to the question of how much life insurance you need. There are various factors, including how accurate you care to be. Formulas vary:
- Simple: Generic “rules of thumb,” such as 5-10 times your annual income
- Sophisticated: Take the present value of projected cash flow shortfalls in a comprehensive financial plan
Your situation changes and requires regular review. For example, you may need less life insurance when you finish paying off your mortgage, or more if you have a new child.
Do you even need life insurance? Probably, but you may have enough coverage from work. If you’re single and debt-free, you have less of a need for it.
Tip: Don’t start with a budget. You may have an idea of how much you want to pay for insurance. Price is a consideration but there are numerous ways to save money. Start by figuring out how much life insurance you need today.
Your life insurance gap
You can calculate your life insurance gap with a basic calculator. The formula is your liabilities minus your assets. Below are a few more details.
Liabilities: Your final expenses
There are costs at death such as the funeral, legal fees, and executor fees. Where is the money going to come from? Life insurance is often a cost-effective source. As a bonus, there’s no need to dip into an emergency fund or to add debt.
Liabilities: Your debts
Financial obligations such as a mortgage or a line of credit don’t disappear if you die. Rather than leaving a financial mess, you can get life insurance to repay them to leave your family debt-free.
Liabilities: Your income lost
If you’re gone, your family loses your income. Some expenses may drop because you were part of the costs. Others will continue. Some expenses such as childcare may increase.
Since the life insurance death benefit is tax-free, look at the after-tax income your family will need to replace. Suppose that’s $30,000 a year. How long do you want this income to continue?
- 2 years: add $60,000
- 10 years: add $600,000
- 20 years: add $1,200,000
The numbers get big, fast. The good news is that term life insurance is inexpensive if you’re healthy.
Liabilities: Your gifts
You may dream of helping your children afford a university education or make a down payment on a home. You may care about a special cause, such as animal shelters. Life insurance lets you make these gifts and reduce taxes.
Assets: Your offsets
Your liabilities may be larger than you expected but your assets offset them. Typical assets include:
- Your emergency fund
- Your nonregistered savings such as mutual funds, ETFs, stocks and bonds
- Your registered savings such as TFSAs and RRSPs
- Your current life insurance, including coverage from work
Ignore assets you don’t want touched. Your emergency fund could be used for other emergencies. Savings could be earmarked to provide retirement income for your spouse.
You can now calculate your life insurance gap and start looking at prices. While life insurance is inexpensive if you’re healthy, you may still need to make compromises to fit a realistic budget.
You can get more sophisticated in calculating your insurance needs by considering factors such as:
- The rate of growth you expect on your assets
- The rate of inflation you expect
- Expected changes in your liabilities
If you’re getting life insurance for estate purposes, you’ll need to be more sophisticated to estimate how much coverage is needed at your projected time of death. To be conservative, also look at how much you might need if you live longer.
The easy way
If you want an easy way to figure out how much life insurance you need, you can consult an independent insurance advisor with access to products from different companies. Even then, having an idea of how much you need will help you decide.
RateHub.ca is an independent financial product comparison site that empowers Canadians to make smart financial decisions by comparing rates on mortgages, credit cards, chequing accounts, savings accounts, and insurance.
We recently reached out to Barry Rubin, Director of Business Development at SSQ Financial Group to answer some questions and give us a breakdown of SSQ's unique offerings. Here is what he had to share with us:
Can you tell me a little bit about your background. How did you get started in the insurance industry?
After completing a program in hospitality and tourism management, I never really had an interest in pursuing a career in the field. Having family in the business, I was always interested in Life Insurance and decided it was the field that really appealed to me where I can always interact with people while being able to help find solutions for their needs.
What are some of things you find most enjoyable about working with SSQ Financial Group?
I really like the team/family oriented culture which starts with the CEO/senior management and is shared throughout all levels of the company.
I enjoy working for SSQ because they are committed to ensuring that the clients best interest are being met through our products and levels of service.
What are 3 things a lot of consumers and brokers may not know about SSQ?
1) SSQ is a mutualistic company and has been in existence for almost 75 years.
2) They are the fastest growing life insurance company in Canada currently at #6 in market share
3) SSQ purchased the Canadian AXA life insurance operations from Intact Financial Corp in 2011
How does your Term Plus plan work?
Terms are available from 10 to 35 years and are renewable on a 5 year basis rather than the length of the original term. There is an Insurability Benefit feature built in which the insurance amount can be increased without evidence of insurability upon certain life events or when obtaining a new loan or increasing an existing one.
The insurance amount may be increased up to 25% of the initial insurance amount to a maximum of $100,000.00. There is also a Disability Insurance (DI) rider can be added which covers clients loans of 1.5% of the face amount up to $3500/month indemnity and proof of the loans are not required until time of claim.
A Critical Illness (CI) rider can also be added which covers cancer, heart attack and stroke and offers $20,000 in benefit. The unique feature of the CI rider is that if the client is standard on the Life policy, they can get the CI rider as long as it was indicated at the time of application.
Lastly included in all of SSQ’s life policies is the Extreme Disablitiy Benefit at no charge to the client. If the insured is in a state of extreme disability for a continued period of 6 months, 50% of the initial insurance amount may be payable in advance up to a maximum of $250,000.00.
Can you give a quick rundown of the Permanent Life insurance plans available at SSQ?
- Term 70
- Term to 100
- Whole Life 20/100 (non-participating with Guaranteed Cash Values and Paid up protection starting in year 10
- Universal Life (Yearly Renewable Term and Level T100 cost of insurance)
What are some differences between SSQ’s basic and enhanced critical illness plans?
The basic covers 3 illnesses Cancer (life threatening), Heart attack and Stroke.
The enhanced covers 25 illnesses and also includes a supplementary benefit of 10% of the insurance up to $50,000 on Coronary angioplasty, ductal carcinoma in situ of the breast, Stage A (T1a or T1b) prostate cancer and Stage 1A malignant melanoma.
The benefit is payable once per insured and is not deducted from the insurance amount and the policy remains in force.