How do mortgages work?
First, a mortgage is the debt you owe when you can’t pay the full price of a home or other property—it’s the difference between what you offer as a down payment and the purchase price. Usually, lending institutions advance the difference to the seller, who then receives the full sale price upon closing of the deal. Then you sit down with the lender to work out your repayment terms.
What is life insurance?
An individually owned life insurance policy provides tax-free money following the death of the insured. It can be used to pay off your mortgage, either in whole or in part.
“Life insurance may completely pay off this obligation if the borrower passes away while there’s still an outstanding balance,” says Peter Wouters, director of tax, retirement and estate planning services at Empire Life Insurance Company in Burlington, Ont…
Generally speaking, term life insurance is best for those seeking a low-cost, short-term solution. Whole life insurance may be best for you if you’re seeking a long-term solution with locked-in rates.
Below, we outline the pros and cons for each—and more.
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The pros and cons of term life insurance
True to its name, term life insurance provides coverage for a set period of time—usually a 10-, 20- or 30-year term. Your premium costs stay the same throughout that period and may change when the term is over, if you choose to renew it. If you pass away during the term, a payment will go to your beneficiaries.
The pros: “Term life insurance is less expensive than whole life insurance,” says Adam Mitchell, president of Mitchell & Whale Insurance Brokers Ltd…
What is critical illness insurance?
Critical illness insurance grants you a one-time, predetermined lump-sum payment in the event of one of several diagnoses. Unlike a disability plan, this is not designed to replace employment as an income stream, but to provide a sum of money to handle expenses associated with living with a critical illness. For example, you might use the funds to modify your living space, or to pay for treatments or in-home care…