Before buying insurance from your bank to cover your mortgage, please consider your options. What does the insurance cover?
- From the bank: only the balance of your mortgage
- From us: whatever you need it to cover such as debts, line of credit
What happens as my mortgage balance decreases?
- From the bank: the coverage amount decreases as your balance decreases.
- From us: the coverage stays the same for as long as you own your policy
What if I switch banks?
- From the bank: You might lose your coverage and need to reapply
- From us: Your coverage stays the same, since it’s not tied to your mortgage
Who gets the benefit if I die?
- From the bank: The Bank
- From us: You decide who gets the insurance and how to use it, such as to pay your mortgage, medical expenses or child’s education- whatever is best for your family
Talk to us, we can help.
If I did a straw poll, I’m sure I’d find that the majority of those asked have some form of life insurance. The reasoning behind taking out this cover is usually centered around the desire to provide protection and security to their family and loved ones in the event of their death, which is clearly an admirable objective. But, if I asked the same group of people who of them had critical illness insurance – essentially, a policy that pays out if you become too ill to work – in all likelihood the number would be much smaller.
Why is this? It makes sense on paper that people would want to sustain their level of income in the event that they become disabled or too ill to work, yet some of the most common objections include the price, a preference to save themselves for such an event (often known as being self-insured) or simply a sense of denial that this could ever happen to them.
Critical illness insurance varies from policy to policy but typical conditions that it covers in Canada includes heart attack, stroke and cancer. Unlike other types of insurance that provide income replacement, if you are seriously ill, critical illness insurance provides a lump sum benefit that can be used in any way you choose.
The benefits of critical illness insurance
Whilst taking out any kind of insurance policy comes down to personal choice and one’s own individual circumstances, many independent financial experts recognize the benefits that critical illness insurance can offer. Here are some of them:
- Whilst saving and self-insuring can seem like an attractive alternative, it simply isn’t an option for many. Even if you are fortunate enough to have the means to save for such an eventuality, you would need to be able to guarantee a solid and consistent return on your investment for it to outweigh the financial benefit of critical illness insurance – some estimates put this at a rate of around 10% return for 20 years.
- Whilst some employers do offer company disability plans, they typically do not pay out the full amount of your pay cheque on an ongoing basis, which can have the potential to have a serious impact on your personal finances, just when you need such a worry the least. What’s more, one of the major advantages of a critical illness policy is that, if you are able to return to work and therefore begin earning again, you still have the benefit of the lump sum that has been paid out under the policy – offering you an incomparable measure of financial freedom to potentially pay off your mortgage or put your kids through university. Essentially, offering you much more financial freedom.
In short, there are no perfect answers in the area of your personal finances, but if you are looking for an option that has the potential to offer you a real sense of peace of mind to secure the financial future of you and your family, critical illness insurance is certainly an interesting avenue to explore.
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The main focus of FAISI’s business is to provide clients with an array of life insurance solutions to reduce risk and improve tax efficiency, whether it be for personal or corporate use. Another branch of business is the Group Benefits sector where your current plan would be analyzed and shopped in the market to offer provide you with the best and affordable plan for your organization. Personal Health Spending Accounts, Health Insurance (Critical Illness, Disability Insurance), Travel and Personal Health Insurance Plans, and Private Wealth Management are also areas where FAISI can help to bring you peace of mind, safety, and security.