Creditor Insurance: Are You Fully Protected?

Creditor insurance is a valuable component of a sound financial plan and can satisfy part of your needs for ongoing financial and emotional security in difficult times. This protection can help you and your loved ones achieve your financial goals despite unexpected events, such as sudden illness, an accident, job loss or death.

CIBC's creditor insurance products include both life insurance and disability insurance on mortgages, personal loans and personal and education lines of credit. CIBC also offers job loss protection for loans and credit cards, and business loan/farm credit life insurance. These products provide protection for the insured either by deferring payments, maintaining minimum payments or paying down (or paying off) debt when an unexpected insured event arises.

Benefits of creditor insurance:

  • provides protection and security
  • affordable and convenient
  • helps protect your ability to repay debt to help maintain repayment history
  • peace of mind

"I already have enough insurance."

Canadians typically do not hold enough insurance. In fact, 30% of Canadian households have less than $50,000 in life insurance protection, and 21% have no life insurance at all. If you lost your job, became temporarily disabled or died, what would happen to your outstanding loans? Consider what would happen to your spouse or other family members if adequate protection were not available. Also, taking on new debt means new financial obligations which existing insurance does not cover.

"Why do I need disability insurance? I'm fine."

Nobody can anticipate what might happen. Less than half the workforce is protected for long-term disabilities, even though one in ten Canadians between the ages of 25 and 65 will suffer a disability. Keep in mind most group or employer plans only cover 60% to 70% of an individual's income in the event of a disability. If income is derived in part from bonuses not typically covered by long-term disability insurance, replacement income is further reduced in the event of disability. And, a person collecting long-term disability benefits may not be able to contribute to a retirement plan, thereby potentially affecting whether or not a comfortable retirement lifestyle is possible.

"I prefer term life insurance to mortgage life insurance."

Consider the differences in these two insurance types for someone with a mortgage. To qualify for term insurance, a medical exam and personal questionnaire may be necessary. With Creditor Life Insurance for CIBC Mortgages, the application process is simple. The majority of customers are automatically approved on completion of an application, and premiums are conveniently added to the debt payment. Creditor insurance is customized to the debt so you only pay for the amount of coverage you need - subject to the maximum limit for the selected policy - and only for the term of the debt. Small amounts of coverage (e.g., loans and/or lines of credit) for short durations cannot be purchased in a term insurance policy. In addition, with creditor insurance on lines of credit and card products, no premium is charged when there is no balance; term insurance cannot replicate this feature.

"I have enough assets to cover me in the case of an unforeseen event."

While this may be true, liquidating a large amount of assets is far from ideal because it can disrupt portfolio growth and knock the asset allocation model out of balance. It can also trigger a large tax bill or negatively affect your goals for estate planning and charitable bequests. Having adequate creditor insurance gives you protection with minimal negative impact on your finances.

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