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Ever wonder why you’re offered mortgage protection insurance when you get a mortgage? In Ontario your mortgage broker is required by law to offer you insurance protection before you sign your mortgage. However, your mortgage broker is not licensed to offer you advice on said insurance. That’s a bit of a problem, isn’t it?
Insurance is a valuable tool to protect you and your family should the unthinkable happen. There are two main ways to do this – through homeowner’s insurance and mortgage protection insurance.
First, let’s note that these two types of insurance are not the same. Homeowner’s insurance protects your home from physical threats like fire, water damage, accidents, and loss of property from theft. It’s required when you have a mortgage. On the other hand, mortgage protection insurance  covers your mortgage payments if you become seriously ill or pays off the balance owing if you die unexpectedly. Unlike homeowner’s insurance it’s optional, but you should have some protection in case you need it.
So, before you meet with your mortgage broker and accept or decline the insurance they will inevitably offer, you should take stock of your current financial situation, with these points in mind:
1. What type of insurance do you currently have?
Most workplaces offer some sort of group insurance, but the type varies by employer. A factor to consider with group insurance is that your employer is the client and can change the coverage at any time; if you leave your job, your coverage will disappear.
Common types of insurance include:

2. Should you have Disability or Critical Illness coverage?
Mortgage disability insurance pays your payment if a claim is approved, up to a maximum payment and up to 24 months.  This coverage is also considered group coverage, which will reduce any benefit you may be entitled to through your employer.
Mortgage critical illness will pay a lump sum amount if a claim is approved and will have a maximum dollar amount, which will be pro-rated if your initial mortgage balance was higher than this maximum at the start.
3. How does mortgage protection insurance fit within my financial plan?
In some cases, you may find the mortgage protection insurance  available through your mortgage lender more restrictive than the options provided by an insurance broker. Critical illness is a good example of this. Few mortgage protection insurance policies offer return on premiums, whereas critical illness products through an insurance broker may offer a return on premiums—which means you’ll get your initial investment back if you don’t make a claim.
The maximum benefit that a mortgage protection insurance policy will provide is the balance outstanding and the beneficiary is automatically the lender.  Every family situation is different and the ability to have a customized solution is only available through individual coverage.
Although most mortgage lenders allow you to apply for mortgage protection insurance directly through them with ease, it doesn’t mean the products they offer are the best for you. Before you finalize your mortgage, think about how different their policies are from those offered by an insurance broker.
Talk to an insurance broker before you sign your mortgage
Ultimately, do your due diligence and meet with an insurance broker before you sign your mortgage papers to compare their insurance products with those offered through your mortgage lender.
Contact Jonathan Jackson, CLU at 1-866-774-4479, jonathan.jackson@sunlife.com or www.sunlife.ca/jonathan.jackson for more information.

Guest blog by:

Jonathan Jackson, Advisor at Sunlife