What are optional mortgage insurance products
Optional mortgage insurance products are life, illness and disability insurance products that can help make mortgage payments, or can help pay off the remainder owing on your mortgage, if you:
- lose your job
- become injured or disabled
- become critically ill
- die
Optional mortgage insurance is a type of credit and loan insurance that you're usually offered when you take out or renew a mortgage. You don’t need to purchase optional mortgage insurance to be approved for a mortgage.
The lender cannot insist that you buy mortgage insurance. You must give your express consent to obtain this product.
Learn more about giving express consent for optional products and services.
Make sure that the insurance meets your needs in terms of protection. If your lender is a federally regulated bank, they must offer and sell you products and services that are appropriate for you, based on your circ*mstances and financial needs. They also must tell you if they’ve assessed that a product or service isn’t appropriate for you. Take the time to describe your financial situation to ensure you get the right product. Don't hesitate to ask questions and make sure you understand the insurance product you have or want.
There are important limits on the coverage that optional mortgage insurance products provide. Read your policy carefully and ask questions if there’s anything you don’t understand before purchasing these products.
These optional products are different from mortgage loan insurance that you are required to purchase if your down payment on your home is less than 20%.
Learn more about credit or loan insurance.
Mortgage life insurance
Mortgage life insurance is an optional product that may pay the balance on your mortgage to the lender upon your death. This product is optional. It can be useful if you have dependents or a spouse who might like to stay in your home after your death, but who might not be able to continue making the same mortgage payments as before.
Before you buy mortgage life insurance, check if you already have insurance coverage that meets your needs through your employer or another policy.
Keep in mind that your home can be sold to pay back the mortgage, so mortgage life insurance may not be necessary for you.
How much mortgage life insurance costs
You pay a fee called a premium, based on the amount of your mortgage and your age. Premiums are usually added to your regular mortgage payments.
As you pay down your mortgage, the premiums generally remain the same, even though you’ll owe less on your mortgage over time.
Where to get mortgage life insurance
You can buy mortgage life insurance through your mortgage lender, or through another insurance company or financial institution. Shop around to make sure you’re getting the best insurance to meet your needs.
Your lender can't force you to buy a product or service as a condition for getting another product or service from them. This is called coercive tied selling.
Mortgage life insurance vs term or permanent life insurance
As you pay down your mortgage, mortgage life insurance covers a smaller amount of money.
Term or permanent life insurance may provide better value than mortgage life insurance. With term or permanent life insurance, the death benefit, or amount payable to your beneficiaries, won't decrease over the term of the policy. Upon your death, your beneficiaries may use the insurance money to pay for the mortgage.
Mortgage disability and critical illness insurance
Mortgage disability and critical illness insurance may make mortgage payments to your lender if you can't work due to a severe injury or illness.
Mortgage disability and critical illness insurance is usually a combination of several insurance products, including:
- critical illness insurance
- disability insurance
- job loss insurance
- life insurance
Most insurance plans have a number of conditions attached to them, including a specific list of illnesses or injuries that are covered or excluded. Pre-existing medical conditions are usually not covered. These terms and conditions of insurance are listed in the insurance certificate. Ask to see the insurance certificate before you apply, so you understand what the insurance covers.
Before you buy mortgage disability or critical illness insurance, check if you already have insurance coverage that meets your needs through your employer or another policy.
How much mortgage disability and critical illness mortgage insurance costs
You will pay a fee called a premium based on the amount of your mortgage and your age. You pay this premium monthly for the term of your mortgage.
Where to buy mortgage disability and critical illness mortgage insurance
You can buy mortgage disability and critical illness insurance through your mortgage lender, or through another insurance company or financial institution. Shop around to make sure you’re getting the best insurance to meet your needs.
Your lender can’t force you to buy a product or service as a condition for getting another product or service from them. This is called coercive tied selling.
Related links
- Mortgage life insurance: know your rights
- Disability insurance
- Life insurance
FAQs
Optional Insurance . Any life, accidental death or accident and health (disability) insurance purchased by Mortgagor in connection with a Mortgage Loan.
Can you get rid of mortgage insurance Canada? ›
PMI Cancellation Mortgage insurance can usually be canceled by the home buyer after he or she has at least 20 percent equity in the home. Borrowers should contact their servicer to find out the procedure for canceling mortgage insurance when they think they have achieved 20 percent equity.
Can you get a mortgage without insurance in Canada? ›
Mortgage insurance is required for mortgages with loan-to-value ratios of 80% - 95% (less than 20% down paid at the time of purchase). The borrower must take out mortgage default insurance from one of the three Canadian providers: The Canada Mortgage and Housing Corporation (CMHC), Canada Guaranty or Sagen.
Is mortgage loan insurance mandatory in Canada? ›
You must buy mortgage loan insurance if your down payment is less than 20% of your home's purchase price.
What is an example of optional insurance? ›
Optional Insurance
For example, travel insurance isn't obligatory but if your flight gets delayed or cancelled, you could end up missing your holiday and not getting a refund for anything you paid for if you don't have travel insurance.
Which type of insurance is optional? ›
Collision and comprehensive coverage are optional, but if you finance or lease your vehicle, you may be required to carry them. Depending on the carrier, other optional coverage types may include roadside assistance, rental car reimbursem*nt, new car replacement, gap insurance and accident forgiveness.
Is it a good idea to remove mortgage insurance? ›
This could save you hundreds of dollars a month that could be used to pay down more of your home loan principle each month or used for other things. Of course, every situation is different. You'll need to crunch the numbers yourself to see if removing PMI on your loan is worth the refinancing costs.
Do I need mortgage insurance if my house is paid off? ›
After you pay off your mortgage, you'll probably want to continue to have a homeowners insurance policy. While your mortgage lender can no longer require you to carry home insurance after you pay off your mortgage, it's up to you to protect your investment.
Is it possible to avoid mortgage insurance? ›
You can ask your mortgage servicer to cancel PMI when the balance reaches 80% of the home's value when you bought it. Or you may be able to cancel PMI early based on an appraisal if home values rise.
How much mortgage can I get with $70,000 salary in Canada? ›
A person making $70,000 may be able to afford a mortgage around $400,000. The mortgage amount you'll qualify for ultimately depends on your credit score, debt and current interest rates.
But in general, the cost of private mortgage insurance, or PMI, is about 0.5 to 1.5% of the loan amount per year. This annual premium is broken into monthly installments, which are added to your monthly mortgage payment. So a $300,000 loan would cost around $1,500 to $4,500 annually — or $125 to $375 per month.
How much income do you need to buy a $650 000 house in Canada? ›
These additional expenses can add up to a significant amount and must be factored into the overall affordability of buying a $650,000 house in Canada. In conclusion, buying a $650,000 house in Canada necessitates a minimum income of at least $87,412.50 per year, assuming a mortgage rate of 3.5% and a 20% down payment.
Is mortgage insurance optional? ›
Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home need to pay for mortgage insurance.
How much does mortgage insurance cost in Canada? ›
Mortgage default insurance rates (CMHC insurance rates) 1
| Loan-to-Value | Premium on Total Loan | Premium on Increase to Loan Amount for Portability |
|---|
| *Up to and including 80% | 2.40% | 6.05% |
| Up to and including 85% | 2.80% | 6.20% |
| Up to and including 90% | 3.10% | 6.25% |
| Up to and including 95% | 4.00% | 6.30% |
2 more rowsJan 12, 2024
You can pay your CMHC fees upfront or by rolling it into your mortgage payments. Buyers will pay between 2.8% to 4% of the mortgage amount for CMHC insurance. You can avoid or reduce CMHC fees if you make at least a 20% down payment, or sell your home and take advantage of the CMHC's portability feature.
What is the meaning of optional coverage in insurance? ›
Optional Coverage Definition & Legal Meaning
Insurance coverage provided by a policy that is beyond what is required by law. Includes Collision Coverage and Comprehensive Coverage.
Is optional life insurance worth it? ›
Voluntary life insurance can be worth it if you are looking for additional coverage to ensure your loved ones do not face financial hurdles after you pass away.
Do you get mortgage insurance back? ›
If the mortgage insurance was financed at the time of origination and is canceled prior to its maturity you may be entitled to a refund if the refundable option was chosen at the time of origination. However, if there was no refund/limited option, this would negate any option for a refund.
Is it better to not have mortgage insurance? ›
Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. But, it increases the cost of your loan.
