I have now talked about all three components of mortgage insurance, Life, Disability and Critical Illness Insurance. I have put together two case studies, one a young couple, one an established family. I hope to show that by using the three types of insurance I have talked about that you can protect yourself and your home in the event of almost any situation.
CASE STUDY: DAVID AND JESSICA - First Time Buyers
David and Jessica are in their mid 20s and have just purchased their first condo. David is an engineer and Jessica is a paramedic, combined they earn $80,000 per year, their home is worth $250,000 and their mortgage payment is $1,500 per month.
Jessica helps sick and injured people every day at her job, she is concerned that David or herself could become disabled and unable to work. She worries that without two incomes, they couldn't pay their mortgage. David’s grandfather recently died of Cancer, David’s mother had to take a few months off work to look after her father while he was sick. David knows that if Jessica were to get seriously ill, he would want to be by her side, helping her recover - not at work. David knows they spent most of their savings on their downpayment and they don’t have the funds for him to take time off work if Jessica gets sick. David and Jessica know that Life Insurance is an important part of their planning process, but they also worry about disability and serious illness. They need a comprehensive solution to their problems, one that is affordable so they can focus on paying off their mortgage.
David, Age 27, Non-Smoker
$250,000 Life Insurance $14.85
$1,500 per month Disability Insurance $26.60
$80,000 Critical Illness Insurance $21.82
David’s Total Monthly Premium $63.27
Jessica, Age 26, Non-Smoker
$250,000 Life Insurance $14.85
$1,500 per month Disability Insurance $35.64
$80,000 Critical Illness Insurance $20.30
Jessica’s Total Monthly Premium $70.79
Joint Total Monthly Premium $134.06
For less than their monthly strata fee, David and Jessica can insure their life, their income, and their health. If either of them dies, their home is paid for; if either of them is disabled and unable to work, their monthly mortgage payment is paid on their behalf; and if either of them becomes seriously ill, they will have a year’s income to help pay the bills and eliminate any financial stress so they can both focus on recovery.
CASE STUDY: RICK AND JOANNE - Established Family
Rick and Joanne are 42 and 40, they live in their family home with their two children. Rick is the primary wage earner in the family, earning $100,000 per year, Joanne is a stay-at-home mom, and has no income. Rick and Joanne recently moved into a bigger home valued at $750,000, they have a mortgage of $400,000 and their monthly mortgage payment is $2,800. If Rick were to die, Joanne would have no source of income. She knows if anything happened to Rick, she would be forced to sell the house and uproot her young children. Insuring Rick’s life for the full amount of the mortgage is Joanne’s biggest concern. Rick isn’t too worried about making the mortgage payments if Joanne died, he has a good income and could support himself and his two kids financially. Rick would like a small amount of life insurance on Joanne, to create a college fund for the kids. Rick estimates that if Joanne became very ill, he would only be able to provide half his income while looking after Joanne and the kids, he knows Joanne would need $50,000 of
Critical Illness Insurance. Rick is healthy and he’s pretty sure he won’t have a heart attack in his 40s like his father did... As such, Rick likes the idea of a Return of Premium (ROP) option attached to his Critical Illness policy. Rick understands that if he never claims on his Critical Illness Insurance, the Return of Premium benefit allows him to cash in the policy and get all of his money back at age 65. Rick and Joanne plan on using the refund to fund their retirement or pay for Long Term Care.
Rick, age 42, Non-Smoker, Primary wage earner
$400,000 Life Insurance $46.08
$2,800 per month Disability Insurance $91.37
$100,000 Critical Illness Insurance
with Return of Premium option $86.04
Rick’s Total Monthly Premium $223.49
Joanne, age 40, Non-Smoker
$100,000 Life Insurance $13.05
$0 per month Disability Insurance $0.00
$50,000 Critical Illness Insurance
with Return of Premium option $41.67
Joanne’s Total Monthly Premium $54.72
Joint Total Monthly Premium $278.21
At age 55, Rick suffers a Heart Attack, he receives $100,000 tax free courtesy of his Critical Illness policy. Rick is off work for six months recovering and receives $14,000 of disability insurance income. Joanne was able to take care of Rick while he was recovering without the stress and burden of worrying about finances. Rick reduces his work hours by half to reduce his stress level, Joanne uses some of the Critical Illness Insurance benefit to go back to school and retrain. Joanne is now working part time earning $30,000 to help make up for Rick’s lower income. At age 65, Rick and Joanne are both healthy and they decide to cash in Joanne’s Critical Illness policy. Joanne receives a tax free cheque for $24,013 which they use as a downpayment
to help their kids buy their first home.
Now these two scenarios are not going to match up with everyone's needs, but I tried to cover a wide swath of the population. I wanted to show that having all the coverage in place isn't ridiculously expensive, the rates are all 100% real by they way. You can also see that it is entirely possible to work around your situation, no cookie cutters here.
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