What is Mortgage Life Insurance in Canada?

It’s a significant financial decision when you buy a home, and confusion sets in when you have to consider insurance and whether or not you need it for your mortgage. Your lender could offer you group insurance if you’re renewing an existing mortgage or buying a new home. Because you’re essentially using up a lot of money for your home, it will be worth protecting your investment. A mortgage life insurance will benefit new homeowners concerned about an illness or death and that their loved ones won’t afford a huge mortgage.

What is Mortgage Life Insurance?

Mortgage life insurance is coverage that gets bought by a borrower. This type of insurance got created to pay off your mortgage in the event of your death or if you got a severe illness. Any money claimed will pay off the mortgage balance, and therefore allowing your loved ones to remain in your home. When arranging for a mortgage, it can be convenient to get a bank’s mortgage life insurance, and it will be easier than getting personal life insurance. Applying for a mortgage life insurance is also an easy process. Mortgage life insurance is the same as group insurance, resulting in lower premiums due to the spread of risk amongst many people.

Does a Mortgage Need Life Insurance?

It’s not compulsory to get mortgage life insurance when you get a mortgage. Most lenders provide you with the option of getting mortgage life insurance. Not getting this insurance will also not prevent you from buying a home. If you decide to get mortgage life insurance, both the coverage amount and the mortgage balance will decline over time. Should you choose to switch to a different mortgage provider, you will need to rebuy insurance as you will lose your coverage. Often costs will increase as you age. Your coverage will end once your mortgage has gotten paid in full.

The Advantages of Mortgage Life Insurance

Here are a few advantages to having mortgage life insurance:

  • It can get cancelled at any time. Several lenders will allow you to cancel your coverage within the first 30 days, even refunding you the premiums that got paid. This affords you time to review your insurance coverage to ensure you got what you need.
  • Your regular mortgage payments include your insurance payments, making your payments convenient.
  • Mortgage life insurance can be an option if you suffer from illness or chronic conditions that prevent you from getting individual life insurance. Unlike individual life insurance, you only answer a few health-related questions, making the application process quick and easy.
  • You can keep your mortgage life insurance if your health worsens and you refinance your existing mortgage.
  • Money can get freed from your other insurance policies. An example is when you get money from your employer benefits’ insurance or personal life insurance policy. The money can fund expenses other than your mortgage, such as your children’s university bills or utility bills.

Before you get any insurance policy, whether it’s for your mortgage or not, ensure you read the terms to understand what coverage you are getting. Compare quotes from different insurance providers to find the best rates with the most coverage.

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Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.

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