Comments on: Anecdotes and Advice from a First Time Home Buyer Part 10 – Insurance http://www.moneysmartsblog.com/first-time-home-buyer-insurance/ Investing and Personal Finance Sat, 31 Jul 2010 15:45:55 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Byron Udell http://www.moneysmartsblog.com/first-time-home-buyer-insurance/comment-page-1/#comment-6745 Byron Udell Mon, 30 Jun 2008 17:21:44 +0000 http://www.moneysmartsblog.com/first-time-home-buyer-insurance/#comment-6745 Term life insurance is by far a better product to buy than mortgage life insurance. Why? Because if you died, your family will need more than just the mortgage paid. In addition, the death benefit remains the same for term life insurance. If you take out a $500,000 policy, your family will get $500,000 if you died. With mortgage life insurance, your family will only get what is currently owed on the mortgage, but you will continue to pay the same price. Mortgage life insurance actually gets more expensive throughout the years because the benefit you would get reduces as what you owe on your mortgage reduces. Term life insurance is by far a better product to buy than mortgage life insurance. Why? Because if you died, your family will need more than just the mortgage paid. In addition, the death benefit remains the same for term life insurance. If you take out a $500,000 policy, your family will get $500,000 if you died. With mortgage life insurance, your family will only get what is currently owed on the mortgage, but you will continue to pay the same price. Mortgage life insurance actually gets more expensive throughout the years because the benefit you would get reduces as what you owe on your mortgage reduces.

]]> By: Paolo http://www.moneysmartsblog.com/first-time-home-buyer-insurance/comment-page-1/#comment-6698 Paolo Fri, 27 Jun 2008 14:38:42 +0000 http://www.moneysmartsblog.com/first-time-home-buyer-insurance/#comment-6698 Whole Life and UL policies do not have cancelation fees. These policies have account values which you can cash in, the "cash surrender value". However, if you cash it in too early, the CSV will be less than the AV. (This is done to allow the insurance company to recover its issue costs in case the policy lapses early.) Generally, there is not much account value in the early years. If you cancel your policy, which you can do by just not paying your premium, the insurance company will not send you a bill for canceling. The CSV is known as a "non-forfeiture benefit". You can also take the CSV and buy a reduced paid up policy. In this case, your death benefit (face amount) is reduced, but you no longer are required to pay premiums (ie, it's paid in full). Another benefit is to take an extended term policy. Again, your CSV is used to pay for term insurance over a fixed number of years (determined by the amount of CSV) with the same death benefit. One thing about UL is that you don't even have to pay a premium if you don't want to. As long as your AV has money in it to cover the charges, it will stay in force. (But you will have to dump in more money later on to keep alive.) You can also buy a term to 100 policy. This is essentially a cheap permanent insurance policy without any of the benefit features described above. If you lapse this policy, you get nothing. This is pure insurance. (And I believe if you live to 100, they will just pay out the benefit.) Some useful information on life insurance: http://www.clhia.ca/download/Life_Brochure_EN.pdf Whole Life and UL policies do not have cancelation fees. These policies have account values which you can cash in, the “cash surrender value”. However, if you cash it in too early, the CSV will be less than the AV. (This is done to allow the insurance company to recover its issue costs in case the policy lapses early.) Generally, there is not much account value in the early years. If you cancel your policy, which you can do by just not paying your premium, the insurance company will not send you a bill for canceling.

The CSV is known as a “non-forfeiture benefit”. You can also take the CSV and buy a reduced paid up policy. In this case, your death benefit (face amount) is reduced, but you no longer are required to pay premiums (ie, it’s paid in full). Another benefit is to take an extended term policy. Again, your CSV is used to pay for term insurance over a fixed number of years (determined by the amount of CSV) with the same death benefit.

One thing about UL is that you don’t even have to pay a premium if you don’t want to. As long as your AV has money in it to cover the charges, it will stay in force. (But you will have to dump in more money later on to keep alive.)

You can also buy a term to 100 policy. This is essentially a cheap permanent insurance policy without any of the benefit features described above. If you lapse this policy, you get nothing. This is pure insurance. (And I believe if you live to 100, they will just pay out the benefit.)

Some useful information on life insurance:
http://www.clhia.ca/download/Life_Brochure_EN.pdf

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