If you want to buy a home or already own one, it’s essential to consider mortgage insurance. Mortgage insurance protects your assets in the event of death, critical illness or disability. Here are five things you may not know about this type of insurance:
- There are several types of mortgage insurance
- There is a big difference between the mortgage insurance offered by your financial institution and that offered by a firm like Matcha Insurance
- There are two key moments to purchase mortgage insurance
- How much does mortgage insurance cost?
- What does mortgage insurance cover?
1. There are several types of mortgage insurance
Here are three different types of mortgage insurance coverage generally offered by an insurer. While each category has a mandate to protect you and your loved ones, each mandate is distinct.
- Mortgage Life Insurance pays off your insured mortgage in the event of your death. Unlike personal life insurance, which gives your loved ones a sum of money, this type of insurance pays the mortgage amount directly to your financial institution. When you die, your heirs are freed from this debt, which can be substantial.
- Mortgage Critical Illness Insurance allows you to pay part or all of your mortgage balance if you are diagnosed with a serious health problem, such as cancer, heart attack or stroke. The lump sum you receive can be applied directly to your mortgage balance.
- The purpose of Mortgage Disability Insurance is to cover your payments if you become disabled as a result of an accident or illness. Since your condition will prevent you from working and receiving a salary, this type of insurance can be useful as it will cover your mortgage payments for a designated maximum period — usually 24 months. If you become disabled as a result of a critical illness, you can make claims under both critical illness insurance and disability insurance.
All of this insurance is temporary, meaning that it covers the insured for a specified period, which is usually the term of the loan. However, while the amount for which you are insured may remain the same throughout the term of the policy, it may also decrease in line with your mortgage balance.
These types of insurance are unrelated to the insurance offered by the Canada Mortgage and Housing Corporation (CMHC). This insurance is required when you buy a home with a down payment of less than 20% and protects your creditor if you can no longer make your payments. It does not protect you from health problems.
2. There is a big difference between the mortgage insurance offered by your financial institution and that offered by a firm like Matcha Insurance
The financial institution with which you have a mortgage offers all types of mortgage insurance packages discussed in the previous section. However, it would be preferable for you to contact an independent financial services firm to assess whether the cost of insurance would be lower with personal coverage. Since the firm allows you to shop among multiple insurers, you can make sure you get the best advice in assessing your situation.
Another advantage of having your mortgage insurance with a firm like Matcha is that if you change lenders, you don’t have to redo the insurance purchase process. For example, if you change your financial institution when you renew your mortgage, you will have to terminate your mortgage insurance contract and enter into a new one with the other financial institution. Since insurance costs are based on your age and health, you will certainly face an increase in your payments for the same insurance; you may even be denied. The interesting thing about beneficiary designation with personal insurance is that, as an insured, you can choose who will receive the amount to manage the mortgage payment.
There’s a myth that you have to insure your mortgage with your lender; this is absolutely false! You are free to purchase insurance wherever you wish.
3. There are two key moments to purchase mortgage insurance
- When you buy your home: When you sign your mortgage, it’s the perfect time to buy insurance
- When renewing your mortgage: Each mortgage renewal is an opportunity to reassess your insurance needs
It is never too late to buy mortgage insurance, especially if you are experiencing changes in your needs, health status or finances.
4. How much does mortgage insurance cost?
- The amount you wish to insure
- Your age — you are considered more or less at risk depending on your age
- How long you want to be insured
- Your lifestyle, especially if you smoke
- Your health status
Depending on the type of mortgage insurance, you may be required to complete a medical questionnaire and conduct medical examinations based on the criteria set out above and on the insurance claims. However, if you are in good health, the insurance purchase process may be short and easy.
For a quote from Matcha Assurance, click here!
5. What does mortgage insurance cover?
Mortgage insurance covers your mortgage if you experience a health problem — whether it’s fatal or not.
- Mortgage Life Insurance: In the event of death, you could be insured for the maximum amount of the mortgage with the bank
- Mortgage Critical Illness Insurance: The majority of Mortgage Critical Illness Insurance covers the lump sum you selected
- Mortgage Disability Insurance: This insurance can provide you with a monthly payment that matches your mortgage payment. This is good to know because this amount is paid after a waiting period, which occurs between the beginning of your disability and the first benefit payment. These payments will be made to you for a period stipulated in your policy, which is usually 24 months
Mortgage insurance is no longer a secret for you! We invite you to discuss mortgage insurance with your advisor. Your contact will be able to assess your situation and present you with the options of the various insurers, taking into account their specific circumstances and yours.