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If I had a dollar for every time I had to say "no, that's not the type of insurance I'm talking about". I'd have a lot more dollars. Today, I want to take the time to break down the different types of insurance coverage that you will hear about, when dealing with your mortgage, so hold on tight.

1. Mortgage Default Insurance/High Ratio Mortgage Insurance: This type of insurance is provided by CMHC, Genworth, or Canada Gauranty. More often than not, it is paid for by the customer, and included with the mortgage, when you purchase your home. Although you pay for this insurance, it is more for the benefit of the lender, than it is to you. Lenders generally require Mortgage Default insurance, when you have less than 20% downpayment on a property, as the policy will cover the lender, in the event that you default on the loan. The premium that you pay is scaled, based on the percentage of your downpayment.

2. Creditor Insurance: This is the type of insurance that is offered to you through your bank, or mortgage broker, when you get a new mortgage. These policies usually offer you life, disability, and sometimes job loss coverage. Be careful though, accepting a policy though your bank might be okay in the short term, but you can't take it with you if you decide to switch lenders down the road. For many people, this isn't a big deal, but it can be, if you've had any significant health changes since you last applied for coverage.

3. Homeowner's Insurance/Fire Insurance: Before your new mortgage goes on the books, you will need to have this type of policy in place. This protects you and the lender, in the event of a major catastrophe, like a fire or flood. If something like this were to happen, the last thing you want to be worrying about, is the fact that you didn't have insurance to replace/repair your home! Lenders actually require that you have this type of coverage in place at all times, and will be notified if your policy lapses. 

Whole Life of Term Insurance: I won't talk about the differences between the two, I'll leave that to the insurance gurus. This type of insurance also covers you, if you were to pass away, and would payout a specific sum of money. These types of policies are great, because it really doesn't matter where you hold your loans or mortgages, the coverage will stay in place. This type of coverage also stays the same, unless you choose to increase or decrease it, regardless of the amount owning on your debts. 

If you have any questions about anything I have mentioned here, I am always just a call or text away

Kristen Bellows @fortheloveofmortgages

403-598-6789