fbpx
best mortgage protection canada - featured

The Best Mortgage Protection Insurance in Canada

Mortgage protection insurance is a life insurance plan that helps you pay off your mortgage if something unexpected happens. About 25% of Canadian families have this type of insurance with their bank or mortgage lender, but term life insurance for mortgage protection is a far better option for most families.

Having solid mortgage protection insurance gives you peace of mind in knowing that you and your family are secure against the potential risks of losing your home in the event that you are unable to make your mortgage payments due to an illness, injury, or premature death.

A well-planned mortgage protection life insurance means that you’ll be able to stay in your home and pay off your mortgage, even if your spouse dies during the term of your loan.

Bank Mortgage Protection Insurance is Cheap...

bank mortgage protection insurance - cheap

Bank or lender offered mortgage protection insurance seems like a cheap option for mortgage protection, however, the policy that you’re going to pay for aims to protect the lender first before your household in case of the death of the life insured person. Unlike term life insurance, mortgage protection insurance does not require any medical examination. Moreover, the death benefit of mortgage protection insurance is paid directly to your lender toward your mortgage balance at the time of death, no excess funds are ever going to be released to your loved ones.

As your mortgage balance decreases, your death benefit decreases as well as it is tied to your mortgage. If you switch to another mortgage lender, you can’t bring your existing policy as it is owned by your lender, this means that your new lender will have to issue you a new one.

Another issue that you will encounter is if you’re purchasing another home, you can’t use the same policy to cover your new property, should you need to move in the future. Term life insurance for mortgage protection is attached to you since you are the policy owner, this means that you can use the same policy, should you need to upgrade your home down the road, as long as the policy fully covers your mortgage balance, and you have enough years left in the policy to fully cover the term of your mortgage so you don’t run the risk of running out of coverage before your mortgage term ends.

If you want to learn more about the difference between mortgage insurance and term life insurance, and which one is more beneficial to you and your loved ones. You can check out the article below:

Term Life Insurance is the Best Mortgage Protection Insurance in Canada

term life insurance for mortgage protection

As you may know by now, term life insurance is simply the best option for mortgage protection for Canadian homeowners. The major key difference is that you’re going to have to go through the whole insurance underwriting process at the time of your application. Having qualified for coverage when you were applying, you know your loved ones are going to receive the payout, in case anything happens to you or your partner during the term of your mortgage.

The post-claim underwriting clause of bank mortgage protection insurance makes it difficult to ascertain that you’re going to be paid any of the benefits at claim time because you will have to prove that you were indeed insurable when you applied. If you can’t provide sufficient proof, they can deny your claim if they find that you had any pre-existing medical conditions that were not properly disclosed when you applied for the policy.

Of course, there are other benefits to implementing a term life insurance for mortgage protection aside from the certainty that your or your loved ones are going to receive the policy’s benefits.

Most term life insurance policies are convertible into permanent life insurance policies like whole life or a universal life insurance policy to cover financial obligations that only go away when the person passes. These are things like final expenses, taxes at death, charitable giving, or tax-free legacies to your heirs, to mention a few.

You can also put in additional coverages on top of your term life insurance to fully protect your family from your mortgage obligation against serious life events such as illness, injury, or a critical condition that may equally prevent you from doing what you do to earn a living.

How Much Mortgage Protection Life Insurance Do You Need?

amounts owed on mortgage

The amount of mortgage protection life insurance you need will depend on a few factors, such as the size of your mortgage, the term of your loan, and your individual needs and circumstances.

As a general rule, of course, the benefit should be enough to pay out your mortgage in cash in the event of your death.

To calculate how much coverage you need, simply take your mortgage balance and multiply it by the number of years left on your loan.

For example, if you have a $475,000.00 mortgage with 20 years left to pay, you would need a life insurance policy with a death benefit of the same amount for at least 20 years. If you’re a first-time homebuyer, a 25-year term life insurance is your best bet.

Mortgage Default Insurance vs Mortgage Protection Insurance

You may be confused as to why this article is focused on life insurance, instead of mortgage default insurance.

Mortgage protection insurance aims to protect your family from the financial burden of mortgage payments in case you or your spouse loses the ability to work for a living due to a covered life event. This means that you will not lose your home even if one of the breadwinners passes away prematurely.

Mortgage default insurance, on the other hand, such as one issued by the CMHC, is a type of insurance that protects your mortgage lender in the event of default on your loan. If you cannot afford to make a 20% down payment, you may be required to purchase mortgage default insurance. However, the mortgage default insurance costs are based on the down payment size and the loan amount. A lower down payment, such as 5% will result in a higher mortgage insurance premium.

Mortgage default insurance costs about four percent of the loan amount and varies depending on the down payment you make. Mortgage default insurance can be paid in a lump sum or added to your mortgage payments. It is a good idea to check with your mortgage lender about eligibility and the amount you need to pay.

CMHC mortgage default insurance protects your lender against the loss of a home if you are unable to make payments on your mortgage. It is mandatory for mortgages with a down payment of less than 20%. Mortgage insurance also increases the liquidity of the housing market, making home buying easier. As with all mortgages, CMHC mortgages have their costs and you should know your options before signing on the dotted line.

The Canadian Mortgage and Housing Corporation (CMHC) was created in 1944 to provide low-cost housing to veterans. Since then, it has expanded to provide mortgage default insurance. This insurance is a form of mortgage default insurance that protects your lender in case you default on your loan. This insurance is required for all mortgages with less than a 20% down payment. By signing up for this insurance, you can avoid facing the financial burden of a defaulted mortgage.

Mortgage default insurance costs about $20 per month and is payable in lump sums or added to your monthly mortgage payments. While CMHC mortgage default insurance is a necessity, most home buyers view it as a punishment for not having enough money to make the payments on time. However, this insurance protects your mortgage lender against the costs of high monthly mortgages, exorbitant interest rates, and stringent lending rules.

You can choose to transfer your CMHC mortgage default insurance to your new loan. The premium will be higher than your previous mortgage. The down payment you make should be at least 20%. However, if you can’t afford a 20% down payment, you can opt to pay an extra $28,000 to avoid paying mortgage insurance. If you can’t afford to pay the CMHC mortgage default insurance premium in full, it’s best to consider other options.

Book A Free Consultation

book an appointment

While we can’t help you if you’re looking to get mortgage default insurance, we definitely can help you implement better mortgage protection insurance to protect your loved ones, first instead of the bank.

As financial security advisors in Canada, we work with major insurance companies and can definitely help you find the best company that suits your mortgage protection needs and budget.

We work one on one with clients in the provinces of Manitoba and Ontario, so if you’re looking for the best mortgage protection insurance, please feel free to book a time on our calendar here, and we’ll accommodate a schedule that’s most convenient for you.

Our meetings are done virtually, especially in Ontario as we’re physically based out of Manitoba but we do cater in-person meetings in Winnipeg, should you prefer.

As financial advisors, our goal is to help you find solutions that fit your needs, hence we guarantee that you will not experience any hard sales from us.

We’ll be more than happy to provide you with a no-obligation, free consultation.

While we can’t help you if you’re looking to get mortgage default insurance, we definitely can help you implement better mortgage protection insurance to protect your loved ones, first instead of the bank.

As financial security advisors in Canada, we work with major insurance companies and can definitely help you find the best company that suits your mortgage protection needs and budget.

We work one on one with clients in the provinces of Manitoba and Ontario, so if you’re looking for the best mortgage protection insurance, please feel free to book a time on our calendar here, and we’ll accommodate a schedule that’s most convenient for you.

Our meetings are done virtually, especially in Ontario as we’re physically based out of Manitoba but we do cater in-person meetings in Winnipeg, should you prefer.

As financial advisors, our goal is to help you find solutions that fit your needs, hence we guarantee that you will not experience any hard sales from us.

We’ll be more than happy to provide you with a no-obligation, free consultation.

Leave a Comment

Your email address will not be published.

Scroll to Top