During real estate transactions, people are bombarded with so much information (e.g., Mortgage, Land Transfer) that nobody has the time or the patience to research for the best Mortgage Insurance coverage. You spend all this time to make sure your mortgage is right, shouldn’t your mortgage insurance be set up correctly too?

Although the mortgage insurance offered through your bank/financial lender is not a bad plan, it does come with a few drawbacks:

• Plan Structure – normally are not competitive with what’s available 
• Covered Benefits – Except mortgage life insurance
• Premiums – Majority of time you’ll save money when you shop around

An alternative to a lenders mortgage insurance plan can be obtained directly from an insurance broker. This enables you to have a superior plan at a lower cost.

Three main types of Mortgage Insurance Plans offered:

Mortgage Life Insurance is designed to insure the outstanding mortgage balance at the time of the insured’s death.

The insurance coverage is directly related to the mortgage. The insured’s beneficiary does not see the money. If the mortgage borrower (or the insured) were to pass away while the mortgage insurance was in force, the coverage will pay off the outstanding balance of the mortgage. The majority of lenders who offer Mortgage Life Insurance have a $750,000 maximum cap on coverage.

Mortgage Critical Illness Insurance or Living Benefit can protect you in case of major illness.

Usually, it only covers:

• Cancer
• Stroke; and
• Acute heart attack

If the insured is diagnosed with any of the three illnesses and survives the waiting period, the insurer pays off the outstanding balance of the mortgage (up to a maximum amount).

This is very basic critical illness coverage.

Mortgage Disability Insurance replaces the mortgage payments (up to maximum amount) in the event the borrower(s) become disabled due to covered medical condition. Similar to the Mortgage Life and Mortgage Critical Illness insurance, Mortgage Disability is a very basic plan.

How It Works:

• The Mortgage Insurance is established based on the initial amount of mortgage.
• Mortgage Critical and Disability Insurance can only be added as a supplemental coverage to Mortgage Life Insurance. Usually lenders don’t offer CI and Disability coverage without Mortgage Life Insurance.
• If the Mortgage is jointly owned, then the coverage is set up as ”Joint First-to-die Death Benefit” coverage. 
• The borrower(s) (or the insured) pays the lender the monthly premiums for the insurance. In return, the coverage is in place to cover the outstanding mortgage balance (up to a maximum). 
• Many lenders, such as RBC Bank, use a third party insurance company such as Canada Life, even though they have an in house insurance department. 

The majority of lending institutions offer mortgage insurance protection to their clients. Usually, the coverage is obtained at the time of signing the loan documents.

Many Canadians are under the wrong impression that all mortgage insurance plans are relatively the same – and since the lending institution is offering them the best mortgage rates, the insurance plan must be competitive as well.

It’s important to know what kind of coverage you have and what plans are available.