The term ‘Insurance’ gets thrown around a lot in this industry. Whether you are purchasing a home, renewing your mortgage or refinancing it can become confusing. Are they referring to the same coverage each time? “Is it required?” “What am I covered for already?” “What are the costs?” are all great questions. Knowing the different types, what is required and what you are covered for is something you should be familiar with at it pertains to your mortgage.
Below are the three types that relate to your home and the mortgage.
Mortgage Loan Insurance
"Insures the Lender'
This takes place when the down payment is less than 20% of the purchase price. This is required as it reduces the risk for the lender and allows a borrower to purchase a home with a lower down payment. The premium is added into the mortgage at the time of purchasing and is only paid once. The three insurers in Canada can be found below.
Home Owners Insurance
"Insures the Home'
This protects the physical property. Coverage such as fire, flood and replacement would all fall under this category. This type of insurance is required for homes that have a mortgage and must be in place on or before the time of purchase and continue for the duration of the mortgage. It is important that your policy is updated regularly and reflects the current mortgage lenders information.
Mortgage Protection Insurance
"Insures the Mortgage Loan'
This protects the homeowners in the event of death, serious accident, or illness that may leave you or your partner unable to work and affecting your ability to pay the mortgage and/or property taxes. With employer and private polices covering lost income, this covers your mortgage balance, payments and property taxes.
If you have further questions about insurance as it pertains to your home, mortgage or personal coverage, please feel free to contact me.