Perils of a Mortgage Life Policy
TheStar.com - Business - Perils of a mortgage life policy
Insurance attached to your home loan can be a poor deal, Ellen Roseman explains
April 22, 2007
You're buying a house and taking out a big loan to pay for it. Now, the bank is asking whether you want life insurance.
Reluctant to leave an unpaid debt when you die, you say yes. Within minutes, your application is approved and the cost is added to your mortgage payments.
For lenders, life insurance is an easy sell. They suggest it at a time when you're vulnerable and have yet to do any comparison shopping.
And they make you sign a waiver form if you say no, agreeing not to hold the lender responsible if something bad happens to you.
Most people don't realize that the life insurance sold by mortgage lenders is different from the policies sold by life insurance agents and brokers.
It sounds like a great deal at the time, but mortgage life insurance can be more expensive than insurance sold separately.
Suppose you're taking out a $250,000 mortgage at the Royal Bank of Canada. You're 49 years old and your spouse is 45.
If you opt for the RBC Insurance HomeProtector plan, you'll pay a monthly premium of $153.90 – or $1,846.80 a year.
Before you sign up, you should shop around. You can do it at www.getterm.cc, a website that offers comprehensive term life insurance quotes for Canadians.
You put in your postal code, age, health and smoking status and the amount of coverage you want. Then, you can compare premiums among 30 to 50 life insurance companies.
For a $250,000 life insurance policy with an initial term of 10 years, the premiums range from $390 to $792.50 a year. For a $250,000 policy with an initial term of 20 years, premiums range from $710 to $2,150 a year.
In both cases (10-year and 20-year terms), nearly all of the companies charge less than RBC's Home Protector.
The website is run by Compulife Software Inc., which also supplies quotes to life insurance brokers.
Consumers can get the names of three agents near them where they can buy policies.
"You buy life insurance to replace the financial value of the person who died. It's related to income, not debt," says Compulife president Bob Barney.
If you have an insured mortgage, your loan will be paid off if you die. But the mortgage payments are typically only one-third of your income. (Banks won't lend you more than that.)
This means your family still has to replace the other two-thirds of your income. You need enough life insurance to cover all your financial obligations to your dependents (including post-secondary education costs).
Compulife has an income replacement calculator at its website, so you can figure out how much coverage you need without relying on a life insurance agent.
There are other key differences between mortgage life insurance sold by banks and term life policies sold by insurance agents and brokers:
Underwriting: The group insurance offered by banks is a one-size-fits-all product. Smokers and non-smokers are lumped together in the same age category. Individual insurance is based on the client's own medical condition. "If you're a slightly overweight smoker, you may be better off with the bank," says Andrew Rickard, a financial writer who used to work as an insurance adviser.
Portability: If you change banks when your mortgage is up for renewal, you will have to reapply for coverage at the new lender. This means submitting new medical evidence and paying rates based on your current age. Suppose you have been diagnosed with diabetes since you took out your mortgage. Your new mortgage lender may not want to insure you.
Level premiums: You may pay $100 a month for the bank's mortgage insurance, but the amount owing on your loan goes down with each payment. Why pay a fixed amount for reducing coverage? With an individual life insurance policy, the face value stays the same for as long as the policy is in force. However, the cost of term insurance goes up when you renew it.
Expiry: The mortgage insurance you buy through a bank terminates when the mortgage is paid off. And you may be cut off when you reach a certain age, generally 70 years old. An individual policy can be held for as long as you want. If you have a term life policy to cover your mortgage, you can convert it into a whole life or permanent policy to cover taxes on your estate after you die.
Beneficiaries: With an individual policy, you name your own beneficiaries. Your loved ones can decide what to do with the life insurance proceeds, either paying off the mortgage or using the money for something else. With group creditor insurance, the bank is the beneficiary and collects the proceeds when you die.
"The banks offer convenience, but individual insurance offers portability and flexibility. That's a better deal, never mind the price," Rickard says.
If you deal with a mortgage broker, you can buy another type of life insurance.
The Mortgage Protection Plan insures more than 100,000 people for life insurance and more than 40,000 for disability insurance. The policies are underwritten by Manulife Financial.
"Our life insurance is portable, unlike that offered by the banks," says Tina Bellavia, vice-president and product manager of the Mortgage Protection Plan.
The plan, which has level premiums, starts out being slightly more expensive than term life. But it's 33 per cent cheaper per dollar of coverage over a 25-year mortgage term, the company says
I'm Going To Be Home Alone...
|"Plenty of Single Women Enter Real Estate Market to Build Portfolios: By: Amy Kay (Published in the Hamilton Spectator, April 20, 2007)
Forget diamonds; equity is a girl's new best friend. That has more single women tapping into the real estate market in the hopes of building or enhancing investment portfolios.
"Why pay rent when you can pay a little bit more a month and build your equity?" argues Brenda Bouw, former Spectator business editor and the author of Home Girl: The Single Woman's Guide to Buying Real Estate in Canada. "A lot of women don't want to wait around to be married or remarried."
Jen McNaughton, a 32-year-old single homeowner who purchased her first property in 2003, agrees.
"I didn't want to live with my parents and I didn't want to pay rent. I wanted to invest, as opposed to investing in somebody else's property."
She's not alone. A recent survey conducted by Royal LePage of 1,002 women across Canada showed 30 per cent of single women who have never been married own their own house.
Lisa da Rocha, vice-president of marketing, Royal LePage Real Estate Services, said buying a house without a husband is becoming more popular with young women.
"With the real estate market being quite strong in the last couple of years, a lot of women are looking at the home market as a way to build equity. Interest rates are relatively low and real estate is a sound long-term investment," da Rocha said.
Having a space of one's own also appeals to many women.
For them, said Judi Caplan, sales representative for Caldwell Banker, it's about asserting independence.
"A lot of the women I've worked with, their goal is not to get married or be with a partner. They want their own space and they want to be mature."
But putting down all that money for a home can give a lone homeowner-to-be pause.
"A lot of women hesitate because they don't believe they can afford to buy property," said Lisette Amalfi-Harris, owner of Mortgage Alliance OAC Mortgages Inc. However, "there are a lot of different products out there that make houses more affordable than ever."
Before you buy;
* Think well ahead and establish a credit rating and savings pattern. * Before you start looking for a house, visit a mortgage broker to find out what kind of financing you qualify for. This way you'll know what you can afford. * Get pre-approved for the mortgage to lock in financing and ensure that there are no surprises when it comes time to put in an offer. * Shop around for a realtor. Find someone you can be comfortable with and who clearly represents your best interests. * Always employ the use of a property inspector. Not only can they ensure your property is structurally sound, they can alert you to potential problems. * Visit the neighbourhood you plan to move into at different times of the day to see what it's like. * Throughout the process, try not to use anyone who has not been referred to you by someone else. * Try to purchase what makes sense and not what you fall in love with because that may not always be practical. Before you buy:
20% of Condo Sales Attributed to Females
|Mar 24, 2007 04:30 AM
Shelly Sanders Greer
SPECIAL TO THE STAR
As the Toronto condo market has grown and matured in the last few years, women have become more powerful behind the scenes of this booming industry and as a buying force.
But as far as one dynamic group of young female condo executives is concerned, this is just the start.
On a February day, as one of the worst winter storms in Toronto began brewing, four women from various streams of the condo business gathered in the Liberty Village area to share ideas, discuss challenges, and contemplate the future in a roundtable discussion organized by the Toronto Star.
Although these women know each other as industry peers, they had never sat down before to talk about their growing role. They represent very different developers, work in various areas, yet they all agreed that the female market for condos is growing quickly.
Lilliana DeCotiis, vice-president, marketing and sales for Amacon, a Toronto-based builder, calls women "the up-and-coming new face to condo buying because they're making this decision earlier in life."
"Women drive sales more even if we have a partner because we're interested in things like kitchen designs," agreed Melissa Moore, senior account director, 52 Pick-up Inc., a strategic design company that has the Ontario Home Builders' Association as a client.
"We're into space planning," added Maria Athanasoulis, vice-president, marketing and sales for Cresford, which builds condominiums throughout the Greater Toronto Area.
"Just give me some closets," said Moore.
Jane Renwick, vice-president, market research for Urbanation, a Toronto condo market research company, pointed out that, "anecdotally, women are a very powerful market. I recall that the last Urbanation condo sales report had 20 per cent of sales attributed to females... our purchasing power is increasing."
Athanasoulis, who worked in banking before entering the condo sector, said the ability to make withdrawals from RRSPs is allowing more women to be first-time buyers of condos.
"My mom was a stay-at-home mom but now women are not just in the workforce, they're trying to build careers," said Renwick. "When you have an idea of your income potential you're more confident in buying a condo."
With more women shopping for condos, it makes sense to have females such as Athanasoulis, Moore and DeCotiis making decisions about design and features attractive to this market. What's interesting is that all three, regardless of titles and responsibilities, find they're involved in all facets of the process – design, pricing, marketing, finishings and choosing safety features that appeal to their own demographic.
"We have the privilege of having our hands in everything," said DeCotiis.
Athanasoulis agreed, saying that she's "involved right from the beginning of the project development to parking, garage lighting and the hours of the concierge. These features, along with ground units with keypad entry systems, are much more important to women than men... The product mix is so important – affordable suites, certain amenities, `green features,' and the right location are all so attractive to females.
"We're starting to want to live well; we equate what we're buying to value so it's important we have the products right."
"Green" features are also growing in popularity, especially among women.
DeCotiis said "women in general have more of a social consciousness. I think they bite into it and see the layers ... bamboo flooring, recycling ... a lot of women are interested in these things."
Women are driven to condos for "affordability, the security aspect, and an instant community," said Renwick. "It's sort of a natural fit."
Moore, DeCotiis and Athanasoulis agreed that women are not just working on the business side, but, as DeCotiis noted, are "on job sites as project managers and labourers," there are still some areas that needcatching up.
"The majority in a boardroom is still men," said DeCotiis, "and I haven't come across a lot of female architects doing skyscrapers."
Marketing is another area of importance, especially to this group of women looking for a positive reflection of their lifestyle. "Of course, I want to see something showing us as successful individuals," said Moore.
Athanasoulis said the key in advertising condos is to make sure you're displaying the image correctly.
"You have to be shooting for the moon," added Moore.
"I prefer the lifestyle sell myself. `You can be this' is a powerful thing," said Renwick.
"You want to show that you can have it all," agreed Athanasoulis.
And these women are confident they can and will have it all when it comes to condos.
Even though this industry's older school was male-driven, Moore said companies have realized they need women to be successful.
"I come from a family business so what I do is in my blood," said DeCotiis.
"Starting about 15 to 20 years ago females got involved in the business. Now when I walk through construction sites I see more women labourers. I don't feel that there are any barriers like there would have been with first-generation Italians. We're fortunate to be working in this generation."
51% of Women Are Now living Without a Spouse
|From The New York Times
By SAM ROBERTS
For what experts say is probably the first time, more American women are living without a husband than with one, according to a New York Times analysis of census results.
In 2005, 51 percent of women said they were living without a spouse, up from 35 percent in 1950 and 49 percent in 2000.
Coupled with the fact that in 2005 married couples became a minority of all American households for the first time, the trend could ultimately shape social and workplace policies, including the ways government and employers distribute benefits.
Several factors are driving the statistical shift. At one end of the age spectrum, women are marrying later or living with unmarried partners more often and for longer periods. At the other end, women are living longer as widows and, after a divorce, are more likely than men to delay remarriage, sometimes delighting in their newfound freedom.
In addition, marriage rates among black women remain low. Only about 30 percent of black women are living with a spouse, according to the Census Bureau, compared with about 49 percent of Hispanic women, 55 percent of non-Hispanic white women and more than 60 percent of Asian women.