Mortgage coverage (life/health insurance)
What is Mortgage Insurance (aka mortgage life/health insurance coverage)? This insurance is different than Mortgage Loan Insurance (which insures the lender from the loan defaulting through CMHC). Mortgage Life Insurance is to ensure your family has enough money to cover the mortgage liability in case of your untimely passing. The chart below summarizes the most important points.
The bank insurance usually covers your mortgage payment only in case of disability, or a portion for critical illness, which is why many people look at their current coverage (through a group benefit plan, for example) or choose individual insurance which pays you directly - not the bank. Which insurance you need (life, disability or critical illness insurance) depends on your situation - whether you have dependents, are single, have substantial assets, other coverage (individual, group), etc.
Only a licensed health and life insurance advisor can sell the coverage; the form applications have exclusions (first 2 years, or for pre-existing conditions) and the onus is on the applicant to ensure that the questions are read correctly.