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Your clients will be eager to learn how creditor insurance can protect their debt repayment in the event of a misfortune, especially because the interest rate on loans has been soaring since the beginning of 2022.
The Bank of Canada raised its policy rate to 4.25 per cent on December 7, 2022, up from 0.25 per cent in early 2022. “Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target,” the Canadian central bank said when announcing the latest policy rate hike.
Meanwhile, the inflation rate, as measured by the consumer price index (CPI), fell to 6.3 percent in December 2022 from its peak of 8.1 percent last June. It is still high, given that 2022 rang in with an inflation rate of 5.1 percent.
Young people have more debt
Wealth declined among households in all age groups in second quarter 2022, according to Statistics Canada data released in The Daily on October 3, 2022. Younger households were the most affected, Statistics Canada said in its analysis of the distribution of household economic accounts for wealth of Canadian households.
In the second quarter of 2022, the household debt to asset ratio increased in every age group for the first time since the start of the pandemic, particularly among younger households, the Statistics Canada analysis reports.
Six suppliers, seven products
In contrast, younger people’s ability to repay their loans improved in second quarter 2022, Statistics Canada estimates. For example, the debt-to-income ratio fell by 8.3 per cent for households aged 35 to 44.
Seven insurance products can help households secure their ability to repay their debts, as illustrated in a comparison table produced for The Insurance Portal by its sister company, InsuranceINTEL. All of these products cover loans for homes, apartment buildings and home equity lines of credit.
Insurance coverage varies
The insurance coverage varies by product. iA Financial Group is the only carrier that offers two creditor insurance products: Universal Loan Insurance and Pick-a-Term and disability credit rider.
SOLO Loan Insurance from Desjardins Insurance is the only product that covers all types of loans. In addition to loans related to a home, SOLO covers vehicle loans, vehicle lease loans, recreational vehicle loans, business loans, leverage loans, personal line of credit, and credit card balance. However, the coverage is only in case of disability.
Quebec Blue Cross Mortgage Plan and Ontario Blue Cross Mortgage Plan only cover the three loans associated with a home. These two Canassurance Blue Cross brands provide coverage for life and disability insurance, but not for critical illness insurance.
Other providers offer creditor insurance coverage for life insurance, disability insurance (sometimes as a rider) and critical illness insurance (always as a rider). You can find more details in the following table.