The Insurance Exchange - London Ontario Insurance

Is Mortgage Insurance the same as an "Insured Mortgage?"

No. Mortgage insurance on your life is not the same as an "insured mortgage." An insured mortgage protects the mortgage lender in the case you do not make your mortgage payments. This coverage is provided by CMHC - Canadian Mortgage and Housing Corporation - and is required if you have a "high-ratio" mortgage. (A mortgage is high-ratio if the amount borrowed is more than 80% of the purchase price or the appraised value of your home, whichever is less.)

Mortgage Insurance

When you take out a mortgage with your financial institution, you may also purchase mortgage insurance, a term insurance policy, so your debt is paid off in the event you die. There are a number of factors to consider before choosing between this form of group insurance and an individual term policy.

  • Mortgage insurance through your lender is non-portable, which means it expires when the mortgage is terminated. When your mortgage is transferred to another lender or if you sell your home and take out a new mortgage, you need to apply for a new mortgage insurance policy if you still require coverage. This can be very problematic if your insurability has changed.
  • The financial institution is the beneficiary of the life insurance policy and receives the insurance proceeds directly in the event of death. This means the surviving family members do not have the option of using the proceeds for other purposes, such as to pay off higher-interest debts such as credit cards in the case where the insurance is purchased through the lender.
  • Under an invidivual policy you are dealing with a licensed insurance advisor, who can help you determine the type and amount of coverage that's best suited to you. Your mortgage lender may not be licensed and may not be able to provide advice on life insurance
  • The rates on an individual policy can be substantially lower especially when non-smoking and healthy lifestyle discounts are added in. These are not available through lenders insurance.
  • Under a lenders policy the underwriting is done at time of death making all claims disputable. Under a personal policy the underwriting is done at the time of application and can only be contestable for two years after issue.
  • Under a personal policy premiums are guaranteed, as are future renewal premiums. Lenders do not guarantee their premiums.




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