Risk & Business Magazine Knight Archer Insurance Fall 2015 | Page 28

Rent or Buy Whichever Path You Choose, Know Your Options BY: TY HOESGEN, KNIGHT ARCHER INSURANCE [email protected] W hether you’re a homeowner, a farmer, or a business owner, you take pride in the fact that you own something. As an owner, you are building equity in an asset that belongs to you - an asset that you control. It seems ironic that people who own assets would rent their insurance. When an individual buys insurance from the lender to cover a loan, that’s exactly what they are doing. When you take out a loan, the lending institution offers you the opportunity to purchase creditor insurance to cover your debt. With this insurance, you don’t own anything; the owner of the policy is the lender. With a private insurance contract through a broker, you own the policy and you control it. It’s similar to the difference between renting and owning. Would you rather pay rent to a landlord and have no control, or own a house that you have control over? Would you rather be forced to fill in nail holes with putty, or have the freedom to paint the Toronto Blue Jays logo over an entire wall? The lender is the beneficiary of a creditor policy, which means if something happens to you, the lender receives the money to pay off your loan. With 28 private insurance, you have the benefit of deciding who receives the money. Maybe instead of fully paying off the loan your beneficiary wants to use some of the money to buy a boat? Or an exotic animal? Or Blue Jays playoff tickets? (I wanted to say the Roughriders instead of the Blue Jays again. But...well, you understand.) All kidding aside, let’s look at an example. You have a $300,000 mortgage over 20 years. With creditor insurance, the value of your coverage decreases as your loan goes down. So if something happens to you after 18 years, when you only have $40,000 left on your mortgage, you only get $40,000 paid off. You’ve been paying for $300,000 of coverage for 18 years, and now you’re only going to get $40,000 paid off? That makes about as much sense as a screen door on a submarine. If you buy a $300,000 policy with a 20 year term through a broker, it’s a different story. Once again, it’s year 18, and you have $40,000 left on your mortgage. But this time, when tragedy happens, your beneficiary receives the full $300,000 tax free. $40,000 to pay off the mortgage, and $260,000 to use as they wish. Even if they RISK & BUSINESS MAGAZINETM FALL 2015 had a higher value left on their mortgage, the family may have higher-cost debt that they want to take care of instead. You always have the option of cancelling the creditor policy and buying a private contract from an insurance broker. A contract that you own, a contract where you decide the beneficiary, and a contract you can customize to suit your lifestyle or business. Whichever path you choose, you should know your options. A Knight Archer broker will work with you to protect what is important. Ty Hoesgen is the life insurance broker at Knight Archer’s Saskatoon branch, where he works to protect his clients’ lifestyles and the value of their assets. He is a fitness enthusiast, former provincial pianist, and self-proclaimed MVP of his Rec Slo-Pitch League.