Mortgage 101 – Creditor Insurance and More Listener Q&A

Dan Ahlstrand and Clinton Wilkins are joined by Mario Cloutier of Manulife to discuss the importance of risk insurance for home additions, creditor insurance, and the importance of financial literacy.

Risk Insurance for Home Additions

Dan Ahlstrand
Welcome back to this very special edition and live edition of Mortgage 101, he is Clinton Wilkins, of course, the host of Mortgage 101, which you can hear monthly here on the radio station. You can catch it anytime you want. If you log on to our website, Halifax.Citynews.ca, and you go to the listen file, all of the back catalog is there. You can listen to that as well. Also in the studio with us from Manulife, is Mario Cloutier and we’re gonna go to the phone lines here because we’re gonna run out of time if we don’t. And we welcome Heather to the program, Heather, how are you?

Heather
Not too bad. How are you?

Dan Ahlstrand
Thank you. Your question, please.

Heather
My question is about risk insurance. We were thinking about doing an addition to our house, and someone mentioned risk insurance.

Clinton Wilkins
I think that would be insurance that you would need to talk to your home insurance broker about. I believe that would be around the construction which typically when you’re building a new home, you get a different type of insurance than you would once the home is completing your living in it. So I would refer you out to your home insurance broker, and they can talk to you about that one, that one kind of would be kind of outside of the scope that
we would do.

Heather
Oh, okay, and it’s just that, do you know if it’s because, if you’re having an addition, is that super expensive?

Clinton Wilkins
I think the risk insurance is a lot more expensive than your home insurance. I built a couple of houses in my day, and that insurance is more expensive because the risk is higher. So basically, they’re taking into account that your house could be opened up, there could be issues, obviously, with the contract, or people could be getting hurt. The house may not be as secure as it normally would be, and a lot of times when you’re getting an addition put on, the house becomes vacant. So I think that’s the insurance that they’re talking about. And if you have a mortgage on your property, you have to have home insurance. That’s one of the big things when you when you have, when you have a mortgage, you have to maintain that insurance, and your current insurance provider may not continue to insure you during the construction but again, I’m not licensed to talk about insurance. I would recommend you talk to your home insurance broker, and they will be able to give you advice on the best way to move forward in your situation.

Heather
Yeah, I know it’s kind of complicated. There’s no mortgage. The house has been paid for for years, and someone is still living in it while this instruction is going on. Okay, that’s good they would take into all of those accounts.

Clinton Wilkins
And I think in your situation, you want to make sure you’re protected, because if you own your house free and clear, you don’t want to be in a situation where you know something happens, and then you need to get maybe some higher cost financing just to get yourself out of this situation. So talk to your home insurance broker before you start any work. That’s my recommendation.

Insurance for Construction Workers

Heather
Yeah. And one of the last questions I’ll ask you is that when you get the construction people to do it, they’re insured as well.

Clinton Wilkins
That’s right, yeah, their insurance will be separate from your insurance. So you want to make sure that your structure, your asset, is protected, and that’s from your insurance broker. You’re going to want to talk to them directly.

Dan Ahlstrand
Okay, thanks. Heather, 902-405-6000, let’s welcome Paul to the program. Paul, how are you?

Paul
I’m pretty good. Thank you. Just a quick question. I saw a program years ago, probably back around 2012 or 2014, and it was on the marketplace, mortgage insurance, through banks, and basically, it started the program with like, 100 people on the dance floor, and then as they brought up different scenarios, you know, people had to lead the dance floor. And I did. It was only one or two people that would have been covered.

Discussion on Creditor Insurance

Clinton Wilkins
I saw that. I saw that one too. I think it was on the CBC marketplace, and they specifically were referencing the insurance that’s being offered at the branch level. So I think they were bringing in TD Bank, potentially Royal Bank, CIBC and Scotiabank, and they were talking about their sales practices around that creditor insurance. I’m gonna throw this one to Mario, because he can speak to what the differences are between the Manulife product and what would be sold, at the bank level, at the branch level. After all, I know that one is very, very different from this Manulife product. So I’ll throw to Mario to answer this one.

Mario Cloutier
Thank you for the question, Paul. For starters, this is a conversation you should be having with your mortgage broker. Whenever you have a conversation about your mortgage, they’re talking about that. So usually what you will be seeing in a financial institution is just what they call a rider program, which is a simple program that’s only associated with your mortgage with that specific financial institution. It doesn’t have pre-funding underwriting. So basically they’ll tell you, you get your mortgage, you pay extra so and so you for your creditor insurance, you get the creditor insurance as long as you have your mortgage with that specific financial institution. When comes time to claim that specific mortgage with that specific financial institution, then they will do the underwriting. So they’ll look at your situation. What caused the situation? Did you have any pre-existing medical conditions? So these programs are typically a bit cheaper than the good coverage that you would get from independent creditor insurance, like a Manulife, if there are a couple of other ones in the industry, but Manulife, if you usually stand out for itself and the coverage you get with a Manulife product, for example, is you’re able to port that coverage, the coverage will stay with you as long as your homeowner so if you were to move property if you were to refinance your property, you’ll still be able to keep that coverage. And the underwriting is being done upfront, so there are no surprises two years or three years down the road, whenever you receive the response that you’ve been authorized and approved for coverage, up to a certain amount that coverage is available. And unless you know some clients sometimes forget or are not at the forefront of their medical conditions, but if you are when, whenever you get the approval from the independent insurers, you’re going to get coverage for the life of your mortgage, so you’re good to go. So these products are self-standing on themselves. They’re not part of the financial institution with which you deal, and it makes the world a difference, because the programs are designed for you, with you, and with the help of your mortgage professional, your mortgage broker, you’re able to get the best coverage and the most adequate coverage for you. That answers your question.

Advantages of Manulife’s Creditor Insurance

Clinton Wilkins
And I’ve seen this situation all the time. Paul, the challenge is that sometimes it also ties people to that financial institution, because they think that that coverage is the only coverage that they’re going to get. If something changes with their health, with ours, we move the mortgage the Manulife is going to come with you. So it’s so, so good because even the age where if someone’s going to get it today for refinancing. If we’re buying, if something’s changing with someone’s health, then you wouldn’t normally get insurance. We can keep this Manulife insurance in place, where that’s not necessarily possible with these products at the bank. So it’s really, we’re not comparing apples to apples in this situation.

Dan Ahlstrand
We only have about a minute left if you want to wrap up. This is, this is your chance.

Clinton Wilkins
This was an amazing show. You know, November is the cherry on top for us. It’s just one of the most important months talking about financial literacy and we’re really in the advice business, and we believe the best advice comes from an unbiased mortgage professional. I’m so happy that we have such a great partnership here with the radio station 95.7 that we’re able to talk to consumers, share information, and break down some of these barriers. I appreciate it. You know, when we first started doing this, this show, about six years ago, we thought we do one season on the weekend, and, you know, we talked about everything that we would talk about from mortgage lending. But certainly, a lot has changed over the years, and there’s a lot in the news and in the media about mortgage lending, and real estate, and we’re gonna continue the conversation into 2025. We’re gonna take a break in December. We’re not gonna have our normal show, and we’ll be back in January, and we’re gonna talk about “merry debt-mas”, as we know Canadians are just so, so indebted. And we’re gonna talk about what the best way to move through 2025 is going to be. If you need any more information, and if you have any questions specifically for us, you can always check us out online at TeamClinton.ca/radio, hundreds and hundreds of blog posts on there, and you can see clips of our show. We’re going to be pushing those out over the next couple of weeks. So if you missed any of the show, you can certainly see it online.

Dan Ahlstrand
He brought cameras in here!

Clinton Wilkins
The radio guy is on video.

Dan Ahlstrand
I have the perfect face for radio. They tell me, anyway, Clinton, I appreciate you coming in. Mario, nice to meet you, and thank you for your time. We’re going to stop and take a break when we come back first, Blake’s going to update us on what’s going on in the news when we come back, it’s time for the open hour. Lots to talk about there. The lines are open, 902-405-6000, we’re back in minutes.