Mortgage – Suman Bhandari https://www.sumanbhandari.com Tue, 06 Jun 2023 18:22:42 +0000 en-US hourly 1 https://wordpress.org/?v=6.7 https://i0.wp.com/www.sumanbhandari.com/wp-content/uploads/2024/07/cropped-Suman-Bhandari-1-e1729567587587.png?fit=32%2C18&ssl=1 Mortgage – Suman Bhandari https://www.sumanbhandari.com 32 32 27850242 Mortgage Insurance Vs Life Insurance https://www.sumanbhandari.com/2021/06/02/mortgage-insurance-vs-life-insurance/ Wed, 02 Jun 2021 22:30:00 +0000 https://www.sumanbhandari.com/?p=1090

Congratulations! on your new home! Buying a new home is a major milestone for many couples as well as considered the biggest asset in your life. However, if something happens to you, have you taken the necessary step to protect it? Homeowners usually have few options to consider.

  • Purchase a life insurance policy from an insurance company
  • Get mortgage insurance from your mortgage lender

Should you get Mortgage Insurance or Life Insurance?

First, let’s look at some of the differences between the two.

 

Mortgage Insurance

Life Insurance

Beneficiary

Mortgage Lender (Banks, Credit union)

Designated Beneficiary (Spouse, Children)

Underwriting

Done at the time of claim. As a result, mortgage life insurance is not 100% guaranteed to payout, as the bank will decide if they will pay out when you make a claim.

Done at the time of application. If approved, your payout is guaranteed.

Premiums & Coverage

Level premiums and a decreasing amount of coverage. Coverage ends when your home is paid off.

Level premiums and level death benefits (as chosen by the insured). Coverage is unaffected by your mortgage ending or employment termination.

Policy Option

No options.

Offers a wide variety of policy types and options to choose from, such as term or permanent life insurance.

Renewal

Renewal required at the end of the renewal period usually the same term of your mortgage. However premium increases in accordance with rates at that time.

Renewal rates are guaranteed at the outset, and no further evidence of insurability is required if you keep the same policy

Cost

2-4% of the mortgage amount

Significantly less than mortgage insurance.

Flexibility

If you move your mortgage to another bank, you’ll have to prove that your health is still good. Your policy doesn’t automatically move with you if you change mortgage providers

Your policy stays with you even if you transfer your mortgage to another company. There’s no need to re-apply or prove your health is good enough to be insured.

Briefly, both are excellent choices when it comes to protection however, the main difference is mortgage insurance covers only your outstanding mortgage balance and the beneficiary is the lender, i.e your beneficiary will not receive any money.

With life insurance, however, your beneficiary gets a tax-free amount of money. The beneficiary has several options on how to use that money. They may choose to pay off the mortgage, use the remaining funds to cover the cost of childcare, education, living expenses, etc.

Do you want to apply for your life insurance? Contact today.

]]> 1090 Group (Work) Life Insurance Vs Individual Life Insurance https://www.sumanbhandari.com/2021/06/01/group-work-life-insurance-vs-individual-private-life-insurance/ Tue, 01 Jun 2021 18:10:50 +0000 https://www.sumanbhandari.com/?p=1047

I have life insurance from my work, Do i need private life insurance?

Or

Work has got me covered, I don’t need private insurance.

Having life insurance in any form is great. Before we answer the question, we must understand difference between Group Life Insurance and Individual Life Insurance. 

First lets start with the basic.

Group Life Insurance: 

Group life insurance is coverage that is offered by your work (sponsor) to a group of people (employee) who have some form of common association with that sponsor. Usually premiums are paid by sponsor.

Individual Life Insurance: 

Unlike Group Life, Individual life insurance is a policy that is paid by one person and covers a single person.

Now, lets look at the key differences.

  Group Life Plan Individual Plan
Coverage:      
  • With a group plan, the amount of coverage you have is typically one or two times your annual salary. Some group plans allow members to purchase additional coverage. For example up to 3 times the annual salary. 
  • Coverage rarely continues past age 65.
  • You choose based on your need. From $20,000 to $200,000 or a million or over. You choose. 
 
  • Can obtain term coverage to age 75 or 80, or permanent coverage until death.
Ownership:   Your plan sponsor (work) owns the policy, you have no control.  You own the policy and have 100% full control. 
Portability:      Your policy ends when you quit your job, or the sponsor no longer provides the plan. Hence, no longer insured. Your policy is yours forever (unless you cancel or die). Leaving your employer doesn’t affect your coverage.
Cost:   Cost is usually low and provided by your employer (but not for all). In some plans, employees are required to pay a premium. Example: The premium could start from $9 up to $30. You are responsible to pay the premium, however, you have the option to customize. If you need maximum coverage, the premiums will be a little high, if you need less coverage so is the cost. Example: For a 25 years old female, non-smoker, the premium starts as low as from $170 a year, i.e $14.16 a month for a 500K coverage.
Convertible:   Generally, you can convert the individual term option to permanent coverage. Can be converted to individual coverage if they retire, leave their job, or plan is terminated, however, the premiums upon conversion are not guaranteed, and may expensive due to age, health status, etc. Generally, you can convert the individual term option to permanent coverage.  

Now, look at this example.

Only Group Life insurance

Henry is a teacher with a wife and a son and makes $70,000 annually. He only has life insurance through work and covers 2 times of his annual salary.

His wife, Claire works as an administrative assistant and makes $45, 000 annually. Henry and Claire purchased a home three years ago, their son is 2 years old. Their mortgage loan is $400,000, have a car loan of $32,000 and the potential cost of sending children to university will total at least $60,000 in the next 18-20 years.

Unfortunately, Henry died in a deadly car collision on the way to work one morning, that $140,000 can perhaps cover his final expenses, car loan, and child’s university tuition down the road. (Assuming $30,000 for funeral, taxes etc, $60,000 for education, leaving $18,000)

Claire will now have to figure out how to raise the child, take care of daily living expenses, mortgage payments, child, and her own support with the income from her job.

Vs having Individual life insurance.

If, Henry has individual life insurance with the death benefit of $500,000. The total amount his family would have received is $640,000 (Group Life + Individual life). Claire would have paid her mortgage in full, have enough for their child’s education, paid off her car loan, spend a generous amount on her husband’s funeral cost, and still have over $125,000 cash. With her regular income and savings, she will be more comfortable supporting herself and the child.

The difference and the scenario presented above will help you understand the benefit of having Individual Life insurance without having significant impact in your budget. 

Do you want to apply for your life insurance? Contact Us today.

]]> 1047