property and Life Insurance questions...

i recently did a little reading on the topic of load protector insurance. most articles i read suggested opting out of loan protector insurance, and getting private life insurance instead.
does this sound correct? any advice on what to get for coverage when shopping?

as for property insurance, we are currently putting a deal together on a 4plex, and in the cost breakdown that our realtor gave us, insurance was listed at $1200/yr.
but in reality, our usual insurance broker is quoting over $2000.
again, which features and how much coverage should we be concerned with, or not concerned with? is there a certain provider that commonly beats the rest in terms of rates?

I agree and that's what I have done. If you wish to discuss this further, please email me at [email protected]

thanks for your comment tina. are you referring to the private life insurance option, over the bank loan protector insurance?

could we keep the discussion here on the board, for the benefit of the community?

Never EVER get life insurance from a bank. It is double to triple the rate you can get as a healthy non-smoker.

For property insurance, or any insurance for that matter, insure only what you can’t afford to lose. Specifically that means $5M+ liability and building replacement cost ( in case of a fire ). Get a high deductible to keep rates low. Insurance is an expense to be minimized as you get zero value from it. It is only there to protect from the very rare disaster and to get a mortgage.

thank you thomas!!! a great start.

Definitely decline the bank offered product.
If anything happens to you, the lender gets paid the mortgage balance owing (whether its $1,000 or $500,000).
The premiums are high and stay the same for the life of the mortgage, even though the balance declines.
Life insurance is cheaper, and if your insurance needs go down (ie.: you pay down the mortgage balances), then you can reduce your coverage to save more $.
And, if anything happens to you, insurance takes care of your family and estate first & foremost.
I'd suggest a larger insurance coverage amount (enough to cover multiple mortgages - congruent with your long term investment plans.)
Definitely discuss with a qualified insurance agent, someone who understands investing.
I can refer you to a couple great agents in the Edmonton area if you dont have an agent already.

Life insurance is the wrong term. It is really income insurance, for your kids or spouse. If your spouse works and you have no kids then probably do not need any insurance. As such you need it only when you are young and have little assets. As such get 10 or at most 20 year term insurance as whole life insurance is a total ripoff. Sales commission is approx the whole first year premium plus annual retainer.

Dave Martin said:

thanks for your comment tina. are you referring to the private life insurance option, over the bank loan protector insurance?

could we keep the discussion here on the board, for the benefit of the community?

Click to expand...

Yes.

I'm a life insurance broker in Calgary and hold the CLU designation. The above comments, in my opinion, are accurate. Assuming you can qualify medically you'll get a better policy for less money if you purchase an individual policy vs a bank policy. And yes, you will pay a commission to somebody no matter which policy you obtain.

thanks everyone! all of this reminded me that i have an employer paid policy, which is expandable to some degree. i'll be contacting them to find out now.

the next obstacle is trying to figure out where that property insurance quote of $1200 came from!

That's good Dave. The only challenge with that is once you leave your company or the company leaves you, the insurance would be cancelled by the group carrier.

the next obstacle is trying to figure out where that property insurance quote of $1200 came from![/QUOTE]

The insurance premium at $1200 is probably because the property owner has had the 4 plex for a long time and likely no claims over the years.

I have seen low insurance premiums often on older properties that came up for sale but the $2000 quoted to you is more of these times and simply a good quote. I would not hesitate to accept that quote if I were you.

The replacement value has substantial impact on the annual building insurance policy price. Likely it was set far too low by the previous owner. So if replacement value doubles then the premium roughly doubles too.

The replacement value is usually substantially above the purchase price as it assume a fire ( or earthquake) and complete destruction ie a rebuild using current code and current prices.

i was afraid that might have been the case, but was hoping for the best. thanks again guys.

Another con with mortgage life insurance is it is not underwritten in advance. This means applicants are automatically "approved" but the policy is not really validated until a claim is made. So if you die, and the underwriter discovers you once had a negative test reading or an affliction you didn't disclose, the insurance company can deny your claim, in which case all you may get is a refund of the premiums you've paid and your mortgage balance remains unpaid.