The record price increase that we have been witnessing for some time, especially for properties – around 20% increase in 2020 and 2021 as well as the readjustment of interest rates, which should reach or even exceed 2% during the year 2022, can cause serious headaches when it comes time to sign a mortgage, but also the associated life or disability insurance.
The legal community is no exception to the rule, as few lawyers have mastered the logic and tricks of insurance. Like the majority of people, they will mechanically take out the mortgage insurance prescribed by their lender, even if it means regretting it later… and especially without knowing that they didn’t have to!
“Indeed, we often do not know that we have the right to contract different protection elsewhere, confirms Nathalie Martel, Advisor to Lawyers Financial. The banks may say or write that mortgage insurance is compulsory, it is false. In fact, we can shop for protection like we do when we buy shoes and we refuse the grease or the soles that we want to sell with at the checkout. You just have to know it! »
Mortgage insurance or term life insurance?
Being able to choose your mortgage protection model allows you to make better choices, such as not signing up for mortgage insurance.
Why ? some will wonder. Because this type of insurance comes with constraints and monetary losses that are not found in term life insurance used for the same purpose. This is the type of alternative insurance offered by Lawyers’ Financial to its members to save them money and stress.
What makes mortgage insurance different from term life insurance? “A lot of elements, answers the adviser Michel Dugal. With mortgage insurance, for example, you don’t own your policy, your lender does. You therefore have no control over the amount insured, dictated by the amount of the loan and not by you. »
Mortgage insurance also does not allow you to enjoy better rates if you are in good health, the premiums being simply calculated according to age. And what about the coverage provided? It declines at the same rate as the mortgage balance and disappears when the mortgage is liquidated or in default.
Conversely, term life insurance belongs to the insured. This allows him to set the amount of protection he wants, to take advantage of better rates and equal coverage at all times, to choose a beneficiary, to keep the same policy once the mortgage is settled. And importantly, to use this coverage for other emergencies, such as education costs or debt repayment.
“To give a concrete example of our approach at the Financière, explains Nathalie Martel, let’s say that for a mortgage of $487,000, if a lawyer takes out mortgage insurance and dies 10 years later, his mortgage balance then rises of $367,000. It is therefore this amount that will be paid to the lender. Whereas if this person takes out 20-year term life insurance from the Financial worth $500,000, the full insured amount will be paid to his or her beneficiary. So we get a difference of nearly $150,000. It is not negligible ! »
Choice and accessibility
Besides being more profitable, term life insurance used for mortgage insurance purposes is also much more flexible than the latter. At the Lawyers’ Financial, for example, two formulas are offered to members to better meet their needs: 20-year term life insurance and another for 5 years.
“The 20-year term life insurance, with fixed payments, guarantees accessibility to the full insured capital without having to pay for economic fluctuations. While the 5-year insurance allows policyholders to obtain better rates than the level costs of mortgage insurance. So if, for example, a young couple buys a first house and wants to do some renovations, they can take out 5-year life insurance that includes these two components, while saving money because of their age and their good health,” says Michel Dugal.
And that’s not all ! It should also be noted that because of its NPO status, Lawyers Financial does not limit access to this term life insurance to its members. Spouses, adult children, employees of the same firm; all these people can benefit from preferential rates and the advantages of these insurance formulas.
“And this accessibility is valid even if the member leaves the profession or retires! adds Mr. Dugal. This proves once again that we work for our members, and not for the profits they can bring us. A vision as rare as it is generous in the world of finance, isn’t it?