Avoid Wasting Money on Costly Mortgage Insurance

A few weeks ago, two people asked me questions regarding the same subject, their mortgage insurance; they were concerned and had some doubts about it.

My initial intentions on the matter were to quickly write about them while adding brief comments. I started my draft. But ideas kept coming the more I thought about it.

After a while, I finally decided to let my mind go on and freed up my pen (it’s more like my keyboard but you know what I mean); a «quick beef» post transformed into a much more elaborate article.

So here’s what came out of it. Hope you like it! 

The conversation I had with those folks reminded me of an Article I wrote back in 2010. Looks like the financial institutions are still singing the same old tune.

It was kind of late for them because it seemed like they already wasted a lot of money on these products, but as they say, better late than never.

With their permission, I will abort the outline of their respective situations. Afterwards, exposing my point of view, I’ll share with you 12 Helpful Tips about Mortgage Insurance.

Note that to protect their privacy, some figures have been altered and rounded up, irrelevant details may also have been omitted but the spirit of each situation was respected.

The Average Person Pays Too Much

First off, my neighbor (we will call him Joe) is renewing is mortgage soon and did not really know how much his mortgage insurance cost him so far.

For Life Insurance, Know about the Theory of Decreasing Responsibility

Adequate Protection for Young Parents

For most families, life insurance needs are not permanent. Indeed, we need more protection while we are young and less when we get older. This is what stipulates the Theory of Decreasing Responsibility.

Thus, when you're young (let’s say 30): you need a lot of protection because your children are young and depend on you; you probably have some debts and a mortgage on your hands. You slowly start to save. Your death could have serious financial consequences for your family.

Almost Always Waive Life and Disability Insurance Clauses on Loans

When you borrow from financial institutions, they systematically offer you life and disability insurance to «protect» your mortgage or loan.

It might be wiser to waive these insurance clauses and thereby avoid paying «small» supplements.

Indeed, most of the time, loan insurance clauses are simply not beneficial to you.

Less Expensive Possibilities

You need to check and compare it with other options available to you. But in most cases, it’s possible to obtain similar protections cheaply.

Thus, Group Insurance available through your job is often interesting and can fully cover your insurance needs at a low price. There’s absolutely no point to have double or triple coverage; you’ll probably only get paid once anyway.

In addition, it is always advisable to combine coverage on a single contract to avoid undue administrative costs.

Carefully Choose Your Life Insurance Agent

Nowadays, with the multitude of products that are offered to us, it’s difficult to make wise choices. We would like to blindly trust our life insurance agent, but that could be one of the most serious mistakes that could be made. In addition to being expensive, that kind of mistake could really place your family in a precarious situation.

Make Your Own Analysis First

There’s no magic formula for choosing a good life insurance agent. You should start by making your own reflection and by determining by yourself your life insurance needs. Your life insurance agent should only validate your analysis and help you choose specific products tailored to your needs.

Choose Products According to Your Needs and Not Your Capacity to Pay

Take Advantage of Group Life Insurance as Much as you Can

The Least Expensive Insurance for Your Entire Family

For most people, group insurance is the least expensive form of life insurance if it’s available to them. Thus you should fully exploit all possibilities it provides.

The majority of group insurance programs offer a basic life insurance. To this mandatory protection, you can add complementary coverage for you, your spouse and even your children; all this at an extremely interesting cost.

Insurance companies can provide group insurance at a very low cost because they are assured of the adhesion of the whole group. Mandatory coverage results in very low cost to you.

Everybody Must Have a Basic Home Insurance

Despite the fact that I am the first to say that we are too insured, there is a form of insurance that should not be overlooked: Home Insurance.

Basic Home Insurance is Affordable

Indeed, even if you are a tenant, nobody can afford to be without a basic home insurance. Do a little shopping, depending on the size of your home and where you live, you should be able to find an adequate coverage for 20 to 30 dollars a month. Home insurance is usually not that expensive.

Prevent a Tragedy

Without home insurance, the consequences of a disaster such as a fire are tragic. In addition to living the experience of a disaster, a lot of people end up in the streets while having lost all their belongings.

Quickly Estimate Your Life Insurance Need

Use the following formula to quickly estimate the level of life insurance coverage that you need:

Life Insurance Need =

Dependents x10 + Final Expenses + Debts – Assets

Dependents:

The annual amount necessary to meet the needs of people who financially depend on you. These people are mainly your children, maybe your spouse or other members of your family.  Your children will usually reach financial independence around the age of 25.

Factor 10:

This factor is an approximation.  The number 10 is relatively suitable for most cases, especially if dependents are young children.  It should be increased if a longer dependency period can be anticipated, for example, for handicapped dependents or stay-at-home spouses.

Final Expenses:

Mainly funeral expenses and other expenses to cover at death. The only part of the equation for all, throughout life. 10,000 to 15,000$ should be sufficient.