Reducing The Cost Of Life Insurance In Vancouver And Other Canadians

There are times in one’s life where the cost of living can feel like it’s becoming too overwhelming.  Quantitative easing policies of the Bank of Canada have helped the economy survive the pandemic but the side effect of this is the recent surge in inflation.  The previously low interest rates have caused an increased amount of borrowing and hence an increase in liquidity.  At the same time, the pandemic caused supply chain shortages due to manufacturing shutdowns from lack of healthy and skilled workers.  This perfect storm of too much money chasing too few goods has caused prices in many industries to rise.

Cancelling Life Insurance Policies To Make Mortgage Payments

Now with the Bank of Canada determined to fight inflation, between Mar 2022 and Jan 2023, the Bank of Canada has raised interest rates an unprecedented eight times.  This dramatic increase in interest rates has made homeowners see a doubling or tripling of their monthly mortgage payments.  Now these homeowners, who are protected by life and health insurance plans that cover their mortgage, are finding it hard to maintain their monthly obligations.  Unfortunately, some have had no choice but to cancel their mortgage life and health insurance protection because they can barely make the payment on their mortgage obligation.

Much life driving without a seatbelt and airbags, having no life and health insurance protection could result in severe financial hardships, for the insured person or their loved ones, should a death or health emergency occur.  A death or a health emergency of a primary breadwinner without life and health protection could mean that there is no financial cushion to compensate for the inability to make the mortgage payments or cover the balance.

Instead of having no coverage at all, there are a number of cost reduction methods at your disposal so that you can maintain some level of protection without breaking the bank.

Options To Take For Life Insurance Coverages

Shorten your coverage term

The most cost effective term duration is one that is as close as possible to the duration of your need.  For example, a mortgage need might be 20 or 25 years, a loan might be 10 years.  A term that is too long means that you will be unnecessarily paying a higher premium.  A term that is too short means that you will see drastic rate increases part way through your needed coverage term.  However, in a cash crunch situation, you may decide to choose a shorter term than needed in order to save cost right now.

Premium offset

If you have a cash value based life insurance policy, and have built up some cash value, you may be able to place the policy on “premium offset”.  That is, you will direct the insurance company to continue paying your premiums by using the cash value in your plan rather than out of your pocket.

Reduced Paid-Up

Some whole life plans allow you to request a “Reduced Paid-Up” and to continue coverage without having to continue payments.  The death benefit is reduced from the original amount but you can stop your payment obligations while being able to keep the coverage in place permanently.

Reduce your coverage amount

Ideal coverage amounts for a mortgage will generally cover the entire balance of the mortgage per person on title.  However, you may decide that covering only a part of the mortgage is better suited to your budget.  For example, if there are two payors to the mortgage and both are employed, then you may choose to cover only half the balance each.  Similarly for disability and critical illness insurance, you may choose to opt for a lower amount if the other spouse is able to continue without the financial input of the other.  Existing policies can be reduced without any penalty and will immediately reduce your monthly costs.

Shop for a better rate

Sometimes if you haven’t shopped your life and health coverage initially or you went through one or more renewals, then it may be worthwhile to shop for a better rate.  Sometimes the price you are paying is already the lowest, but other times you may see significant savings.

VANCOUVER MORTGAGE PROTECTION COVERAGE EXPERTS

Contact us at Venture First Advisory and we’ll help you and give you the options on choosing the right mortgage life insurance that best suits you and your family’s needs. We’re the experts in helping you get the best insurance policy for with your best interests in mind.