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Mortgage Life Insurance

Home insurance in Canada is often confused with mortgage life insurance. Mortgage life insurance provides coverage for all or a part of a home when the homeowner passes away.

These insurance policies are typically secured by the home you purchase, which means if you stop paying premiums, the bank could take away your property.

First-time homebuyers will find this insurance coverage especially important since your family can continue living in the home if there is an unexpected death or situation. Various insurance plans are available for homeowners, allowing you to choose the type of coverage you need.

For example, if you have a spouse who can pay a portion of the mortgage payments when you pass away, you might opt to have just part of the mortgage cost, or cover the entire amount, if you’re uncertain about whether payments will continue.

How Mortgage Life Insurance Works

If you’re shopping for mortgage life insurance, it’s important to begin researching life insurance providers well in advance or as soon as you secure a home for purchase. Once you know the cost of the mortgage, the payments, insurance policy for the contents, and property, you’ll have vital information to begin reviewing mortgage life insurance options.

If you’re new to shopping for this type of insurance, you might begin by inquiring with your bank or financial institution, which may offer this product.

One of the easiest ways to acquire life insurance is through your mortgage lender or a life insurance company with which you have another policy. You can often inquire about a free quote or choose a plan that provides up to 30 days of coverage risk-free so that you can determine if this policy meets your needs, or you can cancel at any time.

If you wish to place more than one person on the mortgage life insurance policy, you can add a guarantor or co-borrower.

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The Cost of Premiums for Mortgage Life Insurance

How much will your insurance premiums cost? Mortgage life insurance is generally based on the cost of your home so that if your home is $500,000, you can expect to pay monthly premiums twice as much as if your house was $250,000. Planning and considering this insurance product as part of your overall home cost is crucial.

The price of your premiums will also depend on the type of insurance plan you choose, which includes permanent or term insurance policies. If you purchase bank-owned mortgage insurance, your coverage will never decrease.

You’ll also have more control over decisions on your mortgage and may add life insurance or other types of coverage for added protection for your family. Life insurance, while not tied to your mortgage, can help cover leftover mortgage payments, future renovation expenses, and repairs not covered by your mortgage life insurance policy.

Mortgage Life Insurance Benefits

Overall, mortgage life insurance provides numerous benefits, though it’s essential to review the various options for your home, as the price of coverage can vary drastically. Many factors determine the cost of this insurance and the benefits of purchasing this coverage, including the option to cancel within the first 30 days, flexible options, many providers, and the ability to ensure multiple people.

It’s important to consider that your policy is based on your age, the amount of your mortgage, how much you want to cover, and your credit history.

If you purchase your new home with one of the central banks in Canada, you’ll have greater access to mortgage life insurance coverage through your provider. Based on your history with the bank, you may receive more competitive rates with the option of less expensive short-term policies, term-life, or whole-life plans.

At the same time, screening is required to determine eligibility for an insurance policy. Even if your life insurance policy is sufficient to cover all or most of your mortgage, mortgage life insurance offers additional peace of mind in the event of an unexpected tragedy.

There are additional benefits to consider when you purchase a mortgage life insurance policy for your home. For example, it is often combined with your monthly mortgage payment, which makes it easier to budget.

This advantage is usually offered through major insurance providers and banks providing this coverage for homeowners. If you signed up for insurance less than thirty days ago, you can cancel any time and receive a full refund.

If you need to refinance your mortgage with your bank or financial institution, your life insurance will remain the same, even if there are changes to your health. In some cases, individuals who cannot get regular life insurance coverage may want to consider mortgage life insurance to protect their home and family.

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Life Insurance vs. Mortgage Life Insurance

Individual life and mortgage life insurance share many of the same attributes, as they provide funding to surviving family members to cover necessary expenses. At the same time, mortgage life insurance is focused on covering the remaining cost of your mortgage, either all or in part.

Your premiums, like life insurance, remain the same throughout the policy, even as your mortgage decreases in value as you pay off your home. On the other hand, life insurance pays out the same amount, as the value never decreases.

The Portability of Insurance

Mortgage life insurance isn’t portable, so if you change providers, you’ll automatically lose the coverage under your previous plan. You may also find that the new policy charges a higher rate for premiums, which may be helpful if your new plan provides more benefits, though it’s essential to consider these changes before making the switch.

Mortgage life insurance is set against your mortgage only, which means you won’t receive additional funding or benefit payments for other expenses, even costs related to your mortgage. For example, if your home is amid renovations or roof repairs, the value of your mortgage life insurance policy will only cover what’s left of your mortgage payments and nothing more.

Individual life insurance, in comparison, offers a set value of funds that you can apply to any expenses, even costs outside of your mortgage, such as debt, bills, and other costs. While mortgage insurance is paid to your bank to cover what’s left of your mortgage and pay off the principal, your beneficiaries won’t receive any payments. However, they can rest assured that no further payments are required for the mortgage.

The Impact of Changing or Selling and Buying a New Property

If you move into a new home or sell and purchase a new property, you’ll need to purchase a new insurance policy, as the other one will expire once you lose your old property. While this may seem inconvenient, it’s best to consider how much of your mortgage you want to cover if you don’t plan on living in the building for long or prepare to lose the policy and purchase a new one when you move properties.

Changes to Your Health Condition and Eligibility for a New Insurance Policy

When your health condition changes over time, you may not be eligible for new coverage. These changes may impact the amount of coverage you qualify for, or you may not be able to buy any plan, which requires some planning ahead. On the other hand, individual life insurance covers many expenses, including mortgage payments, so you’ll have more protection for your assets and family.

Some mortgage life insurance providers may not be qualified to underwrite insurance, which means there may be loopholes or circumstances where only premiums are paid against the mortgage and not the actual benefit amount.

Generally, mortgage life insurance is limited to covering what’s left owing on your home. However, any new expenses, including pending repairs or upgrades to your home, must be funded from an alternative source. Individual life insurance continues to provide funding, up to the benefit amount per the policy, so that you’ll have extra funds for additional living expenses even when your mortgage is paid in full.

Mortgage life insurance may cost less than most individual life insurance plans, though the cost appears to be more expensive as it covers a declined principal amount over time. Life insurance is far more flexible, and the funds are paid to the beneficiaries, which allows them to cover other expenses. At the same time, some flexible options with mortgage life insurance are not as flexible as life insurance products. Your provider may suggest additional coverage for a small fee, including critical illness and disability.

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The Background of Mortgage Life Insurance

Purchasing your first home is one of the essential experiences in life. Many focus on finding the best mortgage rate, home or property to invest in, and other expenses; life insurance to protect your family may not be the first item to consider.

Unexpected illness, death, or other circumstances will quickly change your situation, which requires added protection to ensure your home and your family are protected. In most cases, a mortgage lender will advise purchasing mortgage life insurance to protect your investment and ensure your home is paid, either all or in part, for your surviving family.

While mortgage insurance is essential to property investment, some policies may be more expensive than others and not cover your mortgage adequately. For this reason, it’s crucial to shop around for the best rates and ask your mortgage lender for suggestions on products with the best coverage for your type of home.

While some mortgage insurance plans are not as flexible, it’s important to review several companies and their rates and inquire about a free quote. There are also significant differences in insurance costs between providers, which may not impact the level of coverage or other benefits, making researching your coverage essential.

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Mortgage Life Insurance Providers in Canada

There are plenty of insurance providers for mortgage protection throughout Canada. CIBC, one of the country’s top banks, offers mortgage life insurance through the Canada Life Assurance Company. This plan offers a maximum payoff of up to $750,000 in the event of the homeowner’s death.

While the monthly premium varies depending on the owner’s age, health, and the cost of the house, it’s relatively affordable for individuals in their early 30s with a modestly priced home. CIBC’s coverage through Canada Life Assurance Company ends when you turn 70, though other mortgage life insurance plans may vary when they expire and the terms of the policy.

CMHC offers mortgage protection insurance for Canadians, which offers coverage for homeowners who mortgage up to 95% of their house. It’s also an excellent way for individuals to find an affordable interest rate, even if your down payment is smaller, around 5-10%. In addition to protecting the homeowner, mortgage life insurance ensures that homes are paid for, which helps keep the housing market stable.

In most cases, if you meet all the criteria to qualify for mortgage life insurance, you’ll need a minimum down payment of 5%. CMHC, like other insurance providers, offers a convenient online calculator that can give you an idea of how much your monthly premiums will be and how you can make payments.

Manulife offers mortgage life insurance which can pay up to a maximum of one million, based on your mortgage, policy, and qualifications for coverage. This insurance provider offers affordable rates, ideal for families, couples, and individuals working with a limited budget, with the option of making weekly, semi-monthly, or monthly payments.

One of the significant advantages of Manulife’s plan is the 60-day money-back guarantee, as most companies offer just thirty days. Suppose you find Manulife’s mortgage life insurance isn’t a good fit for you within sixty days, or you find another best policy for your situation. In that case, you can cancel without any consequence.

It’s relatively easy to determine if you qualify for coverage through Manulife. You’ll need to be between 18 and 64, with a guarantor or co-borrower. There are other factors considered, including your credit history and rating. If you don’t qualify for the maximum coverage level, you’ll likely b eligible for another level of protection, which still gives you peace of mind.

Mortgage Life Insurance Summary

Many other banks, financial companies, and insurance providers offer mortgage insurance products so that you can benefit from this coverage in the event you lose your job, are critically ill, injured or disabled, or in event of your death.

While it’s an optional insurance policy, it’s worth considering, even if you already have individual life insurance, variable life insurance, or disability insurance coverage through your employer’s sponsored plan.

One of the most important aspects of purchasing mortgage life insurance is researching as many plans as possible and determining which type of coverage you need based on your circumstances. While many feel confident with life insurance policies and other types of coverage to provide a safety net, mortgage life insurance is a worthwhile layer of protection.

Other types of insurance

Life Insurance in AlbertaLife Insurance in British ColumbiaLife Insurance in ManitobaLife Insurance in New Brunswick
Life Insurance in Newfoundland and LabradorLife Insurance in Nova ScotiaLife Insurance in OntarioLife Insurance in Prince Edward Island
Life Insurance in QuebecLife Insurance in Saskatchewan

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Offers shown here are from third-party advertisers. We are not an agent, representative, or broker of any advertiser, and we don’t endorse or recommend any particular offer. Information is provided by the advertiser and is shown without any representation or warranty from us as to its accuracy or applicability. Each offer is subject to the advertiser’s review, approval, and terms. We receive compensation from companies whose offers are shown here, and that may impact how and where offers appear (and in what order). We don’t include all products or offers out there, but we hope what you see will give you some great options.

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September 25, 2022
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FAQs about Mortgage Life Insurance

Does mortgage life insurance replace life insurance as a means to provide for your family when you pass away?

No. The mortgage life insurance policy covers the cost of all or part of your home but doesn't provide any other benefits or payments to your family members.

Does mortgage life insurance protect survivors or family members from unexpected expenses resulting from home ownership?

While your mortgage is covered based on the insurance policy, it won't cover additional costs associated with your homes, such as a roof replacement, renovations, or repairs.

Is it mandatory to buy mortgage life insurance?

No. It's not mandatory to purchase mortgage life insurance, and it's often considered a good idea as another layer of protection for your home and beneficiaries.

Why is mortgage protection insurance vital if you have other insurance products already?

Life insurance, disability, and critical illness insurance offer excellent protection for many people. However, mortgage life insurance specifically handles paying off what's left of your mortgage so that your beneficiaries can use the benefits of your other insurance coverage for other expenses.

Can I buy mortgage insurance to cover my payments if I fall ill or become disabled?

Yes. Some policies include this coverage, and discussing this option with your mortgage broker or licensed insurance provider is worthwhile.

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