Mortgage Broker

mortgageprotection However, the benefits of Mortgage Creditor Insurance compared to traditional life insurance are not always understood. Is it more expensive? How does underwriting work? What is a declining balance? A fuller understanding of mortgage creditor insurance can help you better explain the many features and advantages to your clients. Mortgage Creditor Insurance, in many cases, consists of life insurance and/or disability insurance. In some cases, it may also include critical-illness insurance. Mortgage Creditor Insurance refers to situations in which an insured client dies and the covered mortgage balance is paid off, relieving the burden of paying off the mortgage. Some insurers also include coverage that will pay pre-payment penalties and discharge fees up to a certain amount. Disability Insurance refers to an insured client who becomes disabled; aer a wait period that can range from 60 to 120 days, the client would be able to receive a benefit for their share of the mortgage payment, for a period ranging from 12 to 24 months. In most cases, this time period gives the client time to focus on getting healthy and relieves them of having to worry about their mortgage payments. Keep in mind that this coverage is a short-term disability product; as part of the client's discussions with a life insurance agent, a long-term disability program should also be reviewed. Mortgage Creditor Critical Illness Coverage can pay a predetermined amount in the event that the client is diagnosed, and lives for a period ranging between 30 and 90 days, with one to six covered illnesses, such as a heart attack. Individual Critical Illness coverage typically covers many more illnesses. AFFORDABILITY ere is a perception that compared to traditional life insurance, Mortgage Creditor Insurance is costlier. However, when you dig in to the numbers over a period of time, this isn't always the case. When comparing Mortgage Creditor Insurance to a typical "term 10" life insurance policy, the latter can, initially, be less expensive; however, when the 10-year term comes up for renewal, the term insurance increases significantly. 1 e reason term insurance can be more expensive at renewal is because there is typically a benefit in which the client is automatically renewed at the predetermined premium. ere is no need for evidence of insurability, which means if you have become uninsurable, the policy you have will remain in place at the new, higher premium. UNDERWRITING Ask if your Mortgage Creditor Insurance provider does upfront underwriting. It is very important to understand what you are selling to your clients. Upfront underwriting may consist of some medical questions on the application, and/or a telephone interview going over many more questions, and/or a nurse going to see the client and taking vitals and liquids, etc. e alternative to upfront underwriting is to underwrite the application at the time of a claim. It is less costly to underwrite the applications that have claims only, and that savings may be a benefit to the client. A major downfall of underwriting at claim time is that the client doesn't know if they actually have coverage until it is needed. OPTIMIZING COVERAGE e purpose of Mortgage Creditor Insurance is to cover debt. e coverage amount should match the amount of debt your client has. A colleague of mine refers to two types of coverage: (1) Debt Reduction Coverage – Creditor Insurance; and (2) Income Replacement Coverage – Term Insurance, and/ or the group benefits one may have from their employer. If a client is fortunate enough to have both types of coverage – debt reduction and income replacement – they are able to maximize their insurance benefits by directing the insurance proceeds where they need to go. For example, Mortgage Creditor Insurance can be used to pay off the mortgage, and the term life insurance can assist with the loss of income that comes with the death of a wage earner. USE A TRUSTED INSURER ere are many benefits to a client having Mortgage Creditor Insurance. As a mortgage broker, you want to ensure the product you are representing has competitive premiums, proper training for the broker, and good material with which the client can make an informed decision. Keep in mind, however, that Mortgage Creditor Insurance is optional, and the client should have contact information for the insurer if they have any questions. CMB MAGAZINE cmba-achc.ca winter 2017 | 35 Mortgage Creditor Insurance refers to situations in which an insured client dies and the covered mortgage balance is paid off, relieving the burden of paying off the mortgage 1 An example of a Term 10 premium, for a 40-year- old male and for $500,000, may be around $50 per month. At renewal, the cost may increase to $360 per month. Keep in mind that with some mortgage creditor insurers, the premiums do not increase for the amortization period, which may be 25 to 30 years.

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