Understanding Insurance: What Every Homeowner Should Know

When it comes to buying or owning a home, “insurance” is a word you’ll hear a lot—but not all insurance is the same. One of the biggest mistakes homeowners make is assuming that all insurance products cover the same things. In reality, there are different types of insurance you’ll come across, and it’s important to understand what each one means so you’re fully protected.

Here are the four main types of insurance you’ll encounter as a homeowner:

1. Mortgage Default Insurance

If you’re buying a home with less than 20% down, this type of insurance is mandatory. It protects the lender if you don’t pay your mortgage.  You can pay it upfront or roll it into your mortgage payments, which is what most people do. 

Most people know about CMHC (Canada Mortgage and Housing Corporation), the government-run provider, but there are also two private providers in Canada: Sagen Financial and Canada Guaranty.

2. Home (Property & Fire) Insurance

This one’s also mandatory—you must have home insurance in place before your mortgage closes. It protects against fire damage and, depending on your policy, may also cover your belongings inside the home.

3. Title Insurance

This is required by every lender in Canada and protects against issues with the property’s title. For example:

• Existing liens you didn’t know about
• Fraudulent transfers of ownership
• Forged documents

You can also purchase your own policy for extra protection. It’s a one-time premium based on your property’s value and provides peace of mind against title fraud, which has become more common in recent years.

4. Life & Critical Illness Insurance

While this is optional, this type of insurance is highly recommended. This policy either pays your mortgage for you while you are sick or pays out the mortgage if you die. 

There are a lot of options available, I work with Manulife Mortgage Protection Plan. It travels with you no matter what lender you use, so you’re covered for the life of your mortgage.

The Bottom Line

Insurance is one of those things you don’t want to think about—until you need it. By understanding the different types of coverage and what they actually protect, you can make sure you and your home are properly safeguarded.

Have questions about which insurance products make sense for your situation? Let’s connect and talk through your options.