Individually Owned Life Insurance vs Mortgage Insurance

– Hey, there, this is Brendan Stoneman with RE/MAX Kelowna and I’m talking to financial advisor Tom Gaymer. Alright, so in a previous video we talked about creditor protection/
mortgage-life insurance and the pros and cons that
go along with that product, but there is an alternative and that’s personally
owned life insurance. So, let’s chat about that – where someone would come to you to talk about the life insurance options. – [Tom] Sure. So, um, first thing you are gonna do is assess somebody’s insurance need. Last thing you want
somebody to do is to pay for insurance that they
don’t actually need. There’s no point, okay? So we are going to ask
a series of questions in relation to that, and one
of the big ones is going to be “What’s your current debt load? “What’s your mortgage amount?” We’re gonna look at that,
get an understanding of what someone’s amortization period is, and then get an understanding of what sort of insurance that we should recommend. – Okay. That makes sense.
– [Tom] Okay. Um, what we then do is we’re
gonna assess somebody up front. We’re gonna ask them a
series of medical questions, which we are licensed to do. That’s the other thing,
credit protection you don’t have to be licensed for. And then we’re actually going to send that to our underwriting department. They’re actually going to go over that, they’re going to look at medical
records, if they need to, they may do blood profile, they may do urine analysis,
something like that. And they’re gonna assess whether or not you should have insurance. – Right. So then in comparison to creditor insurance, where they start doing that after you die, you guys do that up front so you know that once you have your coverage,
you have your coverage. – You have your coverage
other than in an act of fraud, where you’ve clearly lied about something, you have coverage and it’s there and you know that if something happens, you’re loved ones are
going to get protected. – So the creditor protection, in theory, if you die, and everything goes well, (Brendan and Tom chuckle)
which sounds silly to say, the mortgage gets paid out. With personally owned life insurance, then you pass away, what
happens to that money? – Sure, then the beneficiaries
are going to receive the lump sum, which they can
then choose what they do with. – Okay.
– Okay So one thing I’d ask you right now, is what do you think about interest rates? – They’re pretty low.
– Pretty low. I’m probably not going to advise somebody to instantly pay off all of their mortgage if they’re paying like 2.5%. You’re in an extraordinary
low interest rate environment, you want freedom of choice. With mortgage insurance,
you don’t get that. – [Brendan] Right. Well, it’s
nice to know that you can take that and do what you need with it, which may be pay off the mortgage, may be do investments, may be
something entirely different. – [Tom] Exactly. – [Brendan] It’s nice to
have the choice, for sure. – Definitely. – So, a couple more questions, then. What’s the transferability of the insurance product, so you know, you sell that property
and go buy something else. I know with the creditor insurance, you would then kind of start over with a new insurance policy. Here, that’s not the case, then? – Free-standing life
insurance is tied to you, not the property. You take it with you wherever you go. – Awesome. So, if it’s
more secure coverage, you know, better coverage in that sense, you get more freedom and control, where does it measure up costwise compared to the other mortgage insurance? – Sure. Much more benefits,
much cheaper cost. – [Brendan] So it’s cheaper too. – Typically it’s
considerably cheaper. Yeah. – Cool. Well, give Tom a call if you’ve got any life insurance questions and he’ll take good care of you.

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