Insurance. We know it seems boring, but you really can’t afford to ignore it. Your car and house are the easy parts. The law requires you to have auto insurance and your mortgage lender won’t let you in the door without a homeowner’s policy. But if you fail to get the right life and disability insurance coverage, an accident or unexpected death can put your family in serious jeopardy. We’ll show you how to take care of these considerations and more this month! (Are we having fun yet?) Follow along with this online calendar and make sure to sign up for our weekly #MoneyFit newsletter.
• If you want to buy with less than 20% down, you’ll need to pay for mortgage insurance. This insurance doesn’t protect you though—it protects the bank if you default. With 5% down on a $450,000 home, expect an extra $15,400 in fees.
• Consider all your options when it comes to insurance for your mortgage. Mortgage life insurance, which is designed to pay off the rest of your mortgage in the event that you or your spouse die, is one option. But there are alternatives, such as term life insurance, and these might be less expensive and more transferable, meaning your coverage follows you if you move to a new house. Don’t worry: You cannot be denied a mortgage if you refuse mortgage insurance.
Cut your home insurance bill by 20%
Paid off your home in full? You’re entitled to more than a pat on the back. A number of the country’s top home insurance providers offer steep discounts to mortgage-free customers—in some cases as high as 20% off your premiums. But even if you’re decades away from owning your home outright, you may still qualify for other little-known discounts. Several home insurance providers—including Canadian Direct Insurance, Aviva Canada and CAA—offer “new home” discounts of between 10% and 25% off. To qualify for a rebate, your home’s plumbing, electrical, roofing and/or hot water tank must be no older than 15 years of age and therefore less prone to wear-and-tear damages. Not sure if you’re receiving any of these perks? The only way to find out is to call your provider and ask.
Easy hacks to shave your auto insurance premiums
Do you get weak at the knees when you review your monthly auto insurance statement? Well, stop paying so much then. Making some simple and straightforward adjustments could save you hundreds. We’ll show you how right here.
Have you insured your most important asset?
Managing debt and investing your savings are important components of financial planning, but disaster-proofing your life with insurance is a higher priority—especially if family members are relying on your income. Whether you’re just starting your career or are in your peak earning years, your single biggest asset is not your home or your RRSP portfolio. It’s your ability to earn an income now and in the future—what’s often called your “human capital.” You may be surprised to learn if you’re 25 years old and earning $40,000, and if you expect your salary to increase 4% annually until age 65, your human capital is almost $2 million. That’s an asset you need to protect with life and disability insurance.
Recently some financial planners have started to promote long-term-care insurance (LTCI), which is designed to look after you in old age. But is this type of coverage a good idea? The heavily regulated nursing home system ensures a fairly consistent level of basic care for the most frail seniors. But there is much less government support for relatively active seniors who want in-home care or to live in a retirement residence. And as you need more and more care, the costs can increase to the point where they outstrip the resources of all but the wealthy. That’s why LTCI is often touted as a solution. But LTCI premiums are very expensive. For example, a policy purchased at age 45 that provides $2,500 in monthly benefits plus some inflation protection might cost $1,200 per year for a man and $1,900 for a woman. If you purchase it at age 65, it will set you back over $3,000 per year for a man and over $4,800 for a woman. LTCI can make the last few years of your life a little more comfortable. But the high premiums mean you’ll have less income to enjoy life while you’re healthy. “Most people will say ‘I’m going to take that chance and take the trip because I only have one life to live,’” says Peter Benedek, who runs the website retirementaction.com. He argues you’re better off taking a pass on LTCI and using your savings and the equity in your home to cover care costs should they arise.