Mortgage 101 – Financial Protection and Mortgage Insurance

Dan Ahlstrand and Clinton Wilkins are joined by Mario Cloutier of Manulife to discuss the importance of financial protection, challenges with underinsurance and how to get proper advice on insurance.

Dan Ahlstrand
You may not know, but November is Financial Literacy Month, and it’s an opportunity for us to talk about things that we don’t normally sit around and talk about. It’s U.S. Thanksgiving today, and I’ll bet you that many people are getting around their dinner tables today and they’re talking anything but about what the mortgage rates are or how much they have, or anything else. It might divulge into politics or something like that, but it won’t be talking about ways to protect yourself better moving forward so that you’re in good financial shape as we head through the Christmas season and into 2025. If you were listening earlier, before the break, to Clinton Wilkins from Team Clinton. He’s, of course, our host of Mortgage 101 and every year during Financial Literacy Month, we do this special live edition of Mortgage 101 and don’t forget, coming up after the news here at the bottom of the hour, Clinton’s going to open up the toll. Well, Vanessa’s going to open up the telephone lines, but Clinton’s going to take your questions. So if you have a question about about financial literacy, perhaps about some of the things that we’ve discussed or going to discuss, here’s a great opportunity for you to get some free advice on a Thursday as we head into the the latter half of Financial Literacy Month, during the break, we are joined now by this very special guest I’m very pleased to welcome into the the studio, Mario Cloutier, from the head of creditor insurance for Manulife. Mario, welcome.

Mario Cloutier
Thanks for having me.

Dan Ahlstrand
Everybody’s heard of Manulife. It’s a pretty mammoth company. Tell me a little bit about what it is that you do.

Importance of Creditor Insurance

Mario Cloutier
So Manulife itself is a Canadian-based company. It was founded by one of the former premiers of Canada, John A McDonald about 150 years ago. Manulife operates in many different spectrums in the financial services industry, working with independent advisors and mortgage brokers across the country, on the wealth management side, creditor insurance, insurance, individual insurance side and the banking side as well, we pride ourselves in helping customers get better on their quest of financial freedom as fast as possible with the best advice driven solutions that are available in the market at any given point in their financial life, one out of four Canadian consumers going to have a Manulife product in their book. So, that’s a fairly significant size. The overall global strategy of Manulife right now is to win back and be the undisputed market leader in the Canadian segments. All the efforts are being made this year to make sure that we go back to the marketplace and talk to as many Canadian consumers as possible. And Clinton and yourself were talking about this earlier. I mean, there are a lot of uncertainties in the market right now, and now, more than ever, Canadian consumers are looking for sound financial advice. They’re not looking for financial institutions to try to cross-sell products, but for them to give them the best advice-driven value solution and Manulife prides itself in partnering with the best in the industry, like Clinton in that quest for getting the financial freedom to customers.

Dan Ahlstrand
Mario, in your day-to-day dealing with creditor insurance. How many people avoid insurance? And the reason why I asked that is I hear it all the time. They know that premiums are expensive, and you know, I don’t need insurance. Do you need insurance?

Challenges of Underinsurance

Mario Cloutier
Yeah, you do. I mean, you know, insurance is the backbone of the estates that you’re looking to build when you acquire property or when you make some large, substantial investment you’re looking to get in a better financial position, not only for yourself, but your family and your kids eventually, and the loved ones surrounding you. So you want to make sure that you protect what you’ve worked so hard to build. The rule of thumb for insurance needs is you should have at least seven times your income as insurance protections for the future. So not just to secure your assets, but being able to maintain the lifestyle if, God forbid, there was a life event that was to happen to you. So, insurance is fundamental. Whenever you purchase a property, you have to get casualty insurance for the property. If you drive a car, it is the law to have insurance on your car. We feel strongly about the fact that creditor protection and adequate protection for consumers is just as equally important to make sure that if you’re facing a life situation, it doesn’t upside down and upset your family, as well as yourself.

Clinton Wilkins
I’ve been doing this for almost 20 years, and I can tell you, I’ve had so many consumers reach out to me, and even estates reach out to me to find out, did this person takes insurance. And, you know, I’ve had to be sometimes the bad news bear to say, you know, what I offered to them because we offer it to everybody, but they chose to waive it. So many Canadians are just underinsured, and I would say the bulk of Canadians are there are some people who just fundamentally don’t believe in insurance. But yes, Mario hit a good point. We need insurance on our car, and we need insurance on our home. Why are we not thinking it’s important to have insurance to protect our financial, you know, estate, and it could be when you’re living for us, I think disability is just so, so important, but also the life component. There are so many people that I see in the office, Dan, that may be in to see me for a purchase and I think we need both incomes to make this work for you to afford this home. If something happens to one of you, you really will have no choice but to sell it. You know, you can’t afford this on your own. And you know, for those, I really, obviously, I’m trying to have the best conversations I can, and I just need, I know that they need even more insurance than, you know, I’m even talking to them about, but some people are just so averse to it. And sometimes I think you hit a good point. It’s around the payment. But you know, in the grand scheme of it, the payments are very low. It’s a couple of coffees a month in a lot of cases. Here in Nova Scotia, our mortgages are pretty small. The average mortgage that we do is about $360,000 but I think to myself, in our housing situation, if something happens to one of you, you’ll have no choice but to sell the property, and then where are you going? That’s the big thing, right?

Dan Ahlstrand
And it’s not as easy as it was once. Was it if you come across that situation, say, well, I got to sell my house and I’ll just go rent an apartment or something.

Recommended Insurance Products

Clinton Wilkins
Oh, they’re not there anymore, right? And they’re very, very expensive. Like, you know, on our first thing that we said the average two-bedroom apartment, something about $2,500 a month here in Halifax. That’s a lot of cash, and you can certainly own a home for less than renting. I think that’s important and the one question that I had for Mario is, do you have any statistics around the percentage of Canadians that are underinsured?

Mario Cloutier
Yeah, that’s a great question. So every year there’s a survey that’s being done by an association that’s involved in the mortgage industry and so they separate into three groups of income, the percentage of insuring and for the lower two groups, it’s as over as much as 83% of the people that is underinsured and just to further expand on the point you were just making a few seconds ago when they’re saying insurance is too expensive. But when you look at the payment shock and the expenses that are surrounding a life situation where you’re going to have to end up selling your property, whether it’s the moving stuff, and, you know, the coverage for the reinsurance, taking care of all the bills and all that kind of stuff at the end of the day. I think it’s just, you know, safer to just be insured on the proper pace before, as opposed to having to face those expenses before later on. There’s a saying in independent advice, which is, what is the best time to get insurance? And it’s actually when you don’t need it. That was two years ago. It’s just the same way you need to start to invest as much as possible when you’re younger. Premiums are sometimes super cheap like Clinton was saying. The younger you start with these premiums, and some of the products, the creditor insurance, you can pay the same premium throughout the life of your mortgage. So if you were to get, you know, coverage, it when you’re 35 years old, the average cost is $400,000 coverage is anywhere between four to $15 you could carry the same premium throughout your mortgage. So for 25 years, you’d still have the premium that you took when you took the premium in the first place.

Dan Ahlstrand
Mario, what product do you recommend to people that they don’t likely have? You know, we all have mentioned it’s the law. We all have car insurance. We all have house insurance. For the most part, in my experience, property managers are now demanding tenant insurance. But what product do you recommend that we just don’t have?

Getting help from an advisor

Mario Cloutier
So that’s a great question again. The first thing to do is to talk to your advisor, to your mortgage broker, because they will be able to address your situation that much better. So they’ll have the conversation with you, concerning cash flow, you know needs, what’s happening, what’s the plan in the future. So if you have a good, sound conversation with a professional like Clinton, you’ll be able to assess whatever insurance you need. I would think that you need to have both creditor insurance and life insurance because they don’t serve the same purpose. Life insurance is for disability for that matters to be able to maintain the lifestyle that you’ve been establishing with your family working so hard in establishing it, whereas life insurance is to make sure that, again, God forbid, if something were to happen to you and you were to pass on, your family will be supported for the next, you know, decade, or they wouldn’t have to change their lifestyle that you work so hard to be able to accustom to it. So creditor insurance is super important. Life insurance is super important. And I think you started by the segment by saying, people are saying it’s too expensive. I think it’s the lack of understanding and the lack of knowledge that’s causing that perception that insurance can be too expensive, like Clinton was saying, in many cases, it can be just a couple of coffees a month. At least you know, if you’re not certain, don’t take for granted that this is going to be expensive. Have the conversation with your mortgage broker and, if they don’t have all the right answers, they’ll be able to help you and direct you to the proper individuals to help you.

Dan Ahlstrand
We’re going to stop and take a break. We have to update everybody with the news, but the show will continue on the other side of it. Mario is going to stick around for the next segment, and Clinton will be here. We’re going to open up the telephone lines if you have a question for either of these two gentlemen, a perfect opportunity to get some free advice on a Thursday when you’re listening to a special Mortgage 101 edition of the Todd Vino show. I’m Dan Alstrand. We’re back in minutes.