Is Insurance Through Your Employer Enough?

Feb 3

The Importance of Mortgage Life and Disability Insurance: Protecting Your Home and Family

When buying a home, many people focus on interest rates, down payments, and monthly mortgage costs. However, one crucial piece often overlooked is mortgage life and disability insurance. This coverage can provide significant financial protection in case of unexpected illness, disability, or death, ensuring that your home remains secure, even during challenging times. While many people may have insurance coverage through work, mortgage-specific insurance offers unique benefits that are important to consider.

Here’s why mortgage life and disability insurance is essential, even if you have coverage through your employer, and how it can safeguard your most valuable asset—your home.

1. Mortgage Life Insurance: Safeguarding Your Family

Mortgage life insurance is designed to pay off your mortgage balance if you pass away during the mortgage term. While you might already have life insurance through your employer, this is often limited to 1-2 times your annual salary, which may not be sufficient to cover a large mortgage and other financial responsibilities.

Consider this: The average mortgage balance in Canada is around $286,000, according to the Canada Mortgage and Housing Corporation (CMHC). If your work policy only covers a fraction of that amount, your family may still face financial challenges if you pass away unexpectedly.

Key benefits of mortgage life insurance:

Directly linked to your mortgage: The payout goes specifically towards paying off the home loan.
No medical exam required: Often easier to qualify for, especially for those with health concerns.
Premiums locked in: Once you apply, the premiums are based on your age at that time and remain fixed, regardless of changes in your health or employment.

2. Disability Insurance: Protecting Against Income Loss

If you become disabled and are unable to work, would your employer’s disability insurance be enough to cover your mortgage payments and living expenses? Many employer-provided disability plans cover only 60-70% of your salary, which may fall short of your financial needs, especially with a mortgage.

According to the Canadian Life and Health Insurance Association (CLHIA), 1 in 3 Canadians will experience a period of disability lasting longer than 90 days before they turn 65. Without proper disability insurance, your mortgage payments could become a significant financial strain.

Mortgage disability insurance ensures that your mortgage payments continue even if you're unable to work due to a disability, helping to avoid foreclosure or financial stress.

Key benefits of mortgage disability insurance:

Coverage for mortgage payments: Ensures that the largest monthly expense—your mortgage—is covered during times of disability.
Continued protection at fixed premiums: Just like life insurance, premiums are based on your age when you first apply, and they remain fixed throughout the policy, giving you peace of mind as your financial circumstances change.

3. Coverage Gaps in Employer-Provided Insurance

Employer-based life and disability insurance is a great benefit, but it often comes with limitations:

Limited coverage amounts: Work policies are often capped, and may not cover large debts like your mortgage.
Coverage ends with employment: If you change jobs, lose your job, or retire, employer-based coverage typically ends. Mortgage life and disability insurance, however, stays with you regardless of your employment status.
Premiums remain stable: With mortgage-specific insurance, premiums remain based on the age at which you first applied, protecting you from cost increases due to aging or changes in health.

4. How Much Is Needed If You Can’t Work?

In Canada, the average household requires approximately $50,000 to $70,000 annually for basic living expenses. For homeowners, a significant portion of this goes towards mortgage payments. Without mortgage life or disability insurance, an unexpected illness or death could leave your family struggling to make ends meet, especially if employer coverage falls short.

5. Why You Should Consider Mortgage-Specific Insurance

While employer-provided life and disability insurance offers valuable protection, mortgage-specific insurance ensures your home is protected, regardless of your employment situation or changes in health. The locked-in premium rate at the time of application provides financial predictability and peace of mind, knowing your mortgage payments are covered in the event of death or disability.

Conclusion: Don’t Rely Solely on Employer Insurance

Having mortgage life and disability insurance can fill the gaps left by employer-based policies, offering an extra layer of protection for your home and family. With premiums locked in from the age you first applied and protection specifically tied to your mortgage, this insurance ensures that your loved ones won’t be left struggling to make payments if you’re unable to work or if you pass away unexpectedly.

If you’re considering mortgage life and disability insurance, contact me today to discuss how this coverage can provide the financial protection you and your family need.