Many of our clients often ask about insurance options when taking a mortgage. Like many other forms of insurance, mortgage protection insurance offers a peace of mind in the event of unfortunately life events that make it difficult to keep up with payments.
It is a regulatory requirement that mortgage protection insurance is offered to all borrowers when applying for a mortgage but it is not mandatory that the insurance be taken by the borrower. Although mortgage protection insurance varies from different insurance providers, there are two main types of payable benefits that are offered in the industry:
- Disability – Monthly mortgage payments are paid
- Life – Remaining mortgage balance is paid
The main difference between the two is that one carries the payments of the mortgage, while the other completely pays off the remaining balance. Like any insurance, the decision to apply is very personal and the reasons for wanting mortgage protection insurance will vary from person to person. In our experience, most applicants of this type of insurance is taken by those who are self-employed and who do not have any other form of life & disability insurance. For those that are employed, there are usually group employee insurance programs that offer some sort of Life & Disability coverage. Borrowers in these circumstances don’t really see the need to apply for additional coverage under the mortgage protection insurance.
In addition, mortgage protection insurance does not need to be taken by your mortgage broker and borrowers are often better off enrolling through other channels, such as insurance brokers, to find the right product for their specific needs.
Having said that, although there is no pressure to enroll in a mortgage protection insurance program at the time of the mortgage application, the regulatory guidelines still requires brokerages to have an “acknowledgement/waiver” that the protection was offered. The reason for this is if in the future, something were to happen and the client were to claim that it wasn’t offered, the brokerage would have the acknowledgment on record to show that the borrower/s were not interested in the coverage at the time.
If you are curious to learn more about mortgage protection insurance or would like to discuss your mortgage matters, please contact us today and we’ll gladly assist.