Edmonton-based brokerage First Foundation recently started offering layoff insurance to ensure those out of work are still able to make mortgage payments.
Gordon McCallum, president of First Foundation Insurance, said that he first heard about the product eight months ago when a client buying a mortgage asked: “Do you guys sell layoff insurance?”
“I was stunned. Not only had I never heard of it—I was sure that we didn’t sell it, and I was surprised to hear such a product even existed,” McCallum said.
Then after eight months of digging, searching, hunting, and negotiating, First Foundation finally introduced Layoff Insurance earlier this month. The same day the insurance contract came in, McCallum said he called the client who had asked about it and the next day he and his wife came in and each bought a policy.
“Once we thought about it we figured that this is something that Albertans could really use right now,” McCallum said.
“Lots of people in Alberta are getting laid off around now, and even more people are nervous about it. Oil and gas prices are low. The new governments have increased taxes. Mortgage and household debt levels are high. House prices are starting to fall.”
According to the Canadian Association of Accredited Mortgage Professionals, job loss is one of the most common reasons why people end up defaulting on their mortgage, making it the number one cause of foreclosure.
First Foundation’s product covers up to six months of mortgage payments for homeowners who lose their jobs and is available to Canadian residents between the ages of 18 and 63 who have a mortgage and are eligible to claim employment insurance benefits.
Potential clients must have worked at least 25 hours per week for the past 30 consecutive days and there is a 90-day buffer between purchase and the cover coming into effect.
The insurance costs about $60 per month for a $300,000 mortgage, or $77 per month for a $400,000 mortgage. According to McCallum, what makes it different to similar products sold by banks is that it is standalone and can be transferred to another property if the homeowner sells up.
In December 2015, Alberta's seasonally adjusted unemployment rate was 7.0%, up from the 4.7% rate that was registered a year earlier, according to Statistics Canada. The national unemployment rate was 7.1% in December, up 0.4% from last year's rate.
It’s an unfortunate sign of the times but at least one broker in Alberta is looking to help those hit by the faltering economy, while moving into a new product sector.