Different Types of Insurance Related to Getting a Mortgage?

Friday Oct 26th, 2018

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Different Types of Insurance Related to Getting a Mortgage?

Title Insurance: Title insurance is an insurance policy that protects you, the home owner, against challenges to the ownership of your home or from problems related to the title to your home. The policy provides coverage against losses due to title defects, even if the defects existed before you purchased your home. A title defect is a problem with the title which prevents free and clear ownership. There are many types of defects such as rights of way, encroachments (from neighboring properties), unpaid liens, etc. It is mandatory by about 90% of the lenders in the country and it protects the title of the insurance should there be any fraud or errors.

Default Insurance: Offered by CMHC, Genworth and Canada Guarantee. This type of insurance is absolutely Mandatory. If you put less than 20% down, you have to pay it. It is just like GST, nobody gets away from it. It is approx. 4% of the purchase price after the down payment. It is a onetime fee for the full 25 years amortization of the mortgage. It does not protect you but it protects the lender. Should something horrible happen to you and you need to walk away from your home, the insurance company pays out the lender if the sale price is less than all the fees plus balance mortgage amount.

Life & Disability Insurance: Highly recommended but it is not mandatory in order to get a mortgage loan. Disability insurance is designed to replace a portion of your income if you become disabled and are unable to earn an income. A disability can result from a number of causes, including an injury, a serious illness or a mental health issue.  And the duration of a disability can be either short- or long-term.

Home Insurance: It is a form of property insurance designed to protect an individual’s homes against damages to the house itself, or to possessions in the home. Although not mandated by law, insuring your house can give you peace of mind. With severe weather on the rise, confirming accurate replacement value and keeping a current home inventory are important steps. For high-value jewelry, furniture or art, separate endorsements are also available.

 

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