When you bought your current home (or perhaps were planning to buy it soon!), you estimated how much of your budget you could devote to your mortgage payments.
Have you ever wondered what would happen if your income was affected by an accident or a physical or mental health problem that resulted in disability, or if you died? Would you be able to make your mortgage payments and maintain your standard of living for yourself and your family?
If you are self-employed or do not have wage insurance from your employer, it makes sense to think about a strategy to compensate for possible loss of income due to accident or illness.
Credit insurance, like that of Desjardins1, aims to secure your mortgage loan so that you and your loved ones can be relieved of one of your most important financial obligations in the event of disability or death.
Additional financial security
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Regardless of age, no one is safe from an accident or a physical or mental health problem. According to the Canadian Life and Health Insurance Association (CLHIA), one in three Canadians will experience a disability lasting more than 90 days before the age of 65.
And make no mistake: According to the Center for Addiction and Mental Health in Toronto (CAMH), accidents aren’t the only reason, with 30% of the country’s disability insurance benefits being dedicated to mental illness.
As living and property costs rise, mortgages become increasingly expensive, which can increase the financial burden, especially if you’re on a tight budget. These are good reasons to question the need to take out credit insurance when taking out or extending your loan.
“Ask yourself what your sources of income would be if you were unable to work due to an accident or illness. What financial impact would this have on the repayment of your loan in such a situation or in the event of death? », explains Angela Iermieri, financial planner at Desjardins.
If you don’t have a disposable or sufficient source of income, you should ask yourself how you can make up for this deficit. “Would you be willing to consider limiting your quality of life, giving up your assets (e.g. savings for your children’s education or your retirement, your property), jeopardizing certain life projects, or even taking on debt? ? » adds the financial planner.
It is also important to remember that we do not know the duration of disability in advance and that it often results in several unforeseen costs (treatments, medication, travel). Protecting your mortgage helps relieve you and your family of financial stress at a time when you have other things to worry about.
How does credit insurance work?
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Desjardins1 credit insurance covers your mortgage payments for the duration of your disability. This prevents you from dipping into your savings or taking on debt to maintain your standard of living and allows you to focus on your recovery rather than your finances.
The protection lasts as long as your disability lasts, which can be until your loan has been fully repaid or until you reach the maximum age of 702.
In the event of your death, the remaining amount of your loan will be repaid in whole or in part, depending on the coverage, thus freeing your estate from the burden of these debts.
The interesting thing about credit insurance is that you can choose the insurance proportion you want (between 10% and 100%) for your life and occupational disability protection2. A financial advisor can help you determine the insurance coverage that best suits your needs and budget. You can also reevaluate this percentage based on your needs if your financial situation changes.
Another interesting point: the insurance costs decrease because the remaining amount is paid off during the term. In principle, you are guaranteed to pay a premium that is proportional to the amount of your loan, depending on the coverage you choose.
Regardless of whether you are a full-time or part-time employee, self-employed or seasonal worker, you can sign up for Desjardins credit insurance. In any case, a comprehensive analysis of your situation will help determine what best suits your needs.
Contact a Desjardins advisor to learn more about credit insurance or to sign up for it.