Get mortgage insurance

I’ve touched on mortgage insurance before, but after a few conversations the last two weeks, I feel it is worth revisiting.

When you are working on your mortgage, there are two types of insurance that your mortgage professional will talk about.

The first is mortgage default insurance, which is often referred to as CMHC insurance. There are actually three organizations in Canada that provide this insurance:

• CMHC
• Genworth
• Canada Guaranty.

Mortgage default insurance protects the lender in the event that the borrower defaults on their mortgage payments. This insurance is mandatory if you put down less than twenty per cent when you buy your home.

It is a one-time premium, which is added to your mortgage up front. It is calculated on a sliding scale, so the more of a down payment you have the lower your premium will be.

This premium can be ported from one property to another, which can save you thousands of dollars.

The premium protects the lender, so if your home goes into foreclosure they do not have to absorb any loss.

The second insurance that will be discussed with your mortgage professional is mortgage protection insurance. This is commonly life and disability insurance which protects you as the borrower.

Banks and brokerages offer different coverages, so it is important to understand a few key differences.

This optional insurance is generally paid monthly as you go along, and in most cases can be cancelled at any time.

In my early days, I didn’t spend much time discussing the insurance coverage we offer. At the time, we had a different product that (in my opinion) was very expensive and didn’t offer great coverage.

Over the years, I’ve heard many stories about how clients’ lives have been impacted by either having or not having insurance coverage in place.

Within two months of each other, two of my clients had very close calls — about the same time our firm changed the insurance product we were offering.

This product is far more reasonably priced, is portable, and flexible to meet client needs.

As a broker, I must offer my clients optional life and disability insurance coverage. The product our firm offers is Manulife Protection Plan (MPP). Clients have the option of waiving all together or taking life and-or disability coverage.

Most lenders offer coverage a second time when clients are either signing documents in the branch or at the lawyers at time of closing. A key difference between what we offer up front and what is offered by the lender is the portability option.

MPP can be ported from one lender to another in the event that you choose to switch lenders down the road. It can also be ported from one home to the next when you sell.

Most lender products only cover this particular home and their own mortgage. If you switch or sell down the road, you will need to requalify based on your age at the time, which means your premiums will likely go up.

I am a firm believer in having insurance to protect yourself and your family in case something unfortunate happens.

I am not a licensed insurance professional, so when I discuss insurance with my clients I always ask if they have coverage in place.

Part of our discussion includes my recommendation to discuss coverage with a life insurance professional as there may be products out there that are a better fit for their particular situation.

MPP insurance is free for the first sixty days, so if I have clients that plan to look into more detailed options I suggest they opt in and cancel down the road after they’ve made the time to meet with an insurance professional.

This product kicks in the from the time the application is submitted and is fully underwritten up front.

Some people have strong opinions one way or the other about the value of insurance.

Based on my experience I feel strongly that it is important to review your options with a professional to ensure you are adequately protected.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.