Peter Boys, Boys Financial Services

Insurance Options for First Time Home Buyers

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With increasing home prices, millennials considering their first home need to consider the insurance they need to protect them and their families against illness, injury or premature death. Today’s inflated house prices coupled with low down payments are putting many young families at serious risk should they or a spouse be laid up due to illness or injury, or worse, die prematurely. Few can afford the financial risk of not having proper coverage when needed the most, even with an emergency fund in place.

It’s financially vital to ensure you have proper insurance protection against death, illness or injury. If a lender pressures you to purchase disability, critical illness or life insurance coverage, remember that they only pay the outstanding loan balance on the first death, leaving the surviving spouse without any coverage. Your best response is to say “no thanks, we own our coverage personally”.

For couples relying on one income, it makes sense to insure the breadwinner for more than the basic mortgage cost, so that the surviving spouse has funds to carry on without the income earning ability of the deceased breadwinner.

It’s very important for anyone taking on any kind of debt to understand the limitations of bank or creditor life, disability or critical illness coverage. Firstly, you don’t own or control the coverage, and don’t receive a policy to understand what you do have! You simply answer a few questions and sign a document that gives the lender permission to deduct the premiums out of your account. No underwriting is done until you suffer an illness, disability or death, at which time they will do a thorough search of your medical history. If you forgot or misstated some medical issue, they will deny the claim and all your grieving spouse receives is a refund of the premiums paid. Plus the surviving spouse will no longer have coverage because what you had was a joint first to die policy.

So for those of you in the 25 to 40 year age range, disability and critical illness is a much bigger risk than dying, so I would suggest that you consider policies that cover off all 3 risks in one plan. These even cover the stay at home parent as a payout for disability comes from a pool of insurance, rather than from a specific disability policy.

One economical option is level cost of insurance to age 65, which is convertible to permanent coverage at any time without any medical underwriting. For those on a tighter budget, 20 year term can get you to the point where you’ve made a dent in your mortgage. A million dollars of 20 year term coverage for a 30 year old couple is usually much cheaper that their car insurance premium!

For those of you fortunate to have group coverage through work it’s important to remember that if you quit or get fired, your coverage is gone. Some group plans have conversion options but they often are very limited and costly.

The biggest risk for any of us with debt is the loss of our income earning ability from disability, sickness or accident for a long period of time or premature death! Do the research, make sure you own and control your coverage and have a copy of the policy and read it. If you don’t understand it, ask a trusted financial advisor to explain what you have, and if it’s adequate for you and your family’s needs.

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