Critical illness insurance for mortgages: 2024 guide
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Critical illness insurance for mortgages pays off your home loan if you get a serious illness like cancer or heart disease, ensuring you're not burdened with mortgage payments during a health crisis.
It acts as a financial safety net, allowing you to focus on recovery without worrying about your mortgage. If you're new to this realm, read on.
Find out how critical illness insurance for mortgage works, the costs, coverage, and more. You can also compare quotes from different insurance companies using our free comparator to find the best rate right here in no time.
Critical Illness Insurance for Mortgage: 5 Key Takeaways
- Helps pay off your mortgage if you're diagnosed with a covered illness.
- Provides financial security and peace of mind, allowing you to focus on recovery.
- Eligibility criteria include having a mortgage, age between 18-55, and more.
- Costs vary by age, health, gender, and coverage amount.
- Rates typically range from $20-$100 per month.
What is mortgage critical illness insurance?
Mortgage critical illness insurance or critical insurance for mortgages is a type of insurance that pays out a lump sum benefit. You get this benefit if you get diagnosed with a critical illness while you are still paying off your mortgage.
You can use the money to pay off your mortgage or for any other purpose you choose.
Some common examples of critical illnesses covered by mortgage critical illness insurance include:
- Cancer
- Heart attack
- Stroke
- Multiple sclerosis
- Parkinson's disease
- Alzheimer's disease
The amount of benefit that you will receive from your mortgage critical illness insurance policy will depend on the terms of your policy. However, it is typically enough to pay off the outstanding balance on your mortgage.
Before we dive into the details, you can explore the best critical illness insurance plans right here using our free comparator below to get an idea of what's available. Compare plans and get free quotes in no time right here by clicking the button below.
Find a critical illness insurance policy that's right for you
How does critical illness insurance for mortgages work?
Mortgage critical illness insurance is a type of insurance that helps protect your home and family if you're diagnosed with a covered critical illness while you're still paying off your mortgage.
Here's how it works:
- You purchase a policy: When you apply for a mortgage, your lender may offer MCII as an optional add-on. You can also purchase it directly from an insurance company.
- You choose your coverage amount: The amount of coverage you choose will depend on the outstanding balance of your mortgage, your income, and other factors.
- You pay premiums: You will pay premiums monthly or annually.
- You are diagnosed with a covered critical illness: If you are diagnosed with a critical illness that is covered by your policy, you must submit a claim to your insurance company.
- Your insurance company pays out the benefit: If your claim is approved, your insurance company will pay out a lump sum benefit directly to your lender. This benefit can be used to pay off your mortgage balance or towards other expenses.
Good to know
Most policies have a waiting period of 30 days after the diagnosis. You will get your money after the waiting period. MCII has some exclusions, such as pre-existing conditions, suicide, and drug or alcohol abuse.
Who can apply for critical illness insurance for mortgages?
To be eligible for Mortgage Critical Illness Insurance (MCII) in Canada, you must generally meet the following requirements:
- You must be a legal resident of Canada.
- You must be between 18 and 55 years old (the age range may vary slightly by insurer).
- You must have a valid mortgage in good standing with a Canadian lender.
- You must be in good health and able to pass the insurance company's medical underwriting process.
The process may involve a medical exam and/or a review of your medical history.
Additional requirements
- Your income must be sufficient to cover your mortgage payments and other financial obligations.
- You must be a full-time employee or have a stable source of income.
- Some insurance companies may offer lower premiums to non-smokers.
Other factors that may affect your eligibility:
- Pre-existing conditions: If you have any pre-existing medical conditions, you may still be eligible for coverage, but your premiums may be higher or you may have certain illnesses excluded.
- Family history: Your family history of certain critical illnesses may also affect your eligibility and premium costs.
- Lifestyle: The insurance company might consider your lifestyle habits, such as smoking and alcohol consumption.
Is there a limit on the amount of MCII you can buy?
Yes, there is a limit on the amount of critical illness insurance for mortgage you can buy in Canada.
The maximum coverage amount will depend on several factors, including:
- Your mortgage amount: Usually, the outstanding balance of your mortgage is the maximum coverage amount for MCII. This ensures that the benefit will be sufficient to pay off the remaining mortgage debt.
- Your income: Insurance companies assess affordability when determining your maximum coverage amount. They want to ensure you can afford the premiums without jeopardizing your financial stability.
- Your age: Younger applicants may be eligible for higher coverage amounts than older applicants due to their longer life expectancy.
- Your health: Pre-existing medical conditions may limit your access to high coverage amounts or even disqualify you from coverage altogether.
Here are some typical maximum coverage amounts for MCII in Canada:
- Individual plans: $500,000 to $1 million
- Joint plans: $1 million to $2 million
- Family plans: $2 million to $3 million
These are just general guidelines, and the actual maximum coverage amount you qualify for may be lower. Use our free comparator below to get a better idea by getting quotes and comparing different policies from various Canadian providers.
Find a critical illness insurance policy that's right for you
Can more than one person apply?
Yes, in most cases, more than one person can apply for MCII in Canada — we call it a joint plan or family plan.
You can include the following in your policy:
- Joint mortgage holders: Both individuals named on the mortgage can apply for coverage on the same policy.
- Spouses or common-law partners: Even if they are not listed on the mortgage, your spouse or common-law partner can be included in the policy.
- Children: Some insurance companies allow children to be covered on a family plan, providing financial protection if a parent is diagnosed with a critical illness.
Expert advice
You may already have some coverage for critical illnesses through your employer or other insurance policies. Review your existing coverage to see if you need additional coverage from mortgage critical illness insurance.
How much does critical illness insurance for mortgage cost?
The cost of MCII in Canada can vary depending on several factors, including:
- Your age
- Your health
- Your smoking status
- Your gender
- The coverage amount
- The insurance company
- The type of plan
To give you a general idea, here is a range of typical monthly premiums for MCII in Canada:
| Age (Non-Smoker) | Mortgage Amount | Monthly Premium |
|---|---|---|
| 30 | $250,000 | $20 - $40 |
| 40 | $500,000 | $40 - $70 |
| 50 | $750,000 | $70 - $100 |
Where can I buy mortgage critical illness insurance?
There are several options for purchasing Mortgage Critical Illness Insurance (MCII) in Canada:
- Through your mortgage lender
- Through an insurance company
- Through an insurance broker
- Through online insurance marketplaces
Here are some of the most well-known providers:
- Canada Life Insurance: Offers individual and joint MCII plans with comprehensive coverage for various critical illnesses.
- Sun Life Critical Illness Plans: Provides individual and joint MCII plans with multiple coverage options and flexible benefit payouts.
- Manulife Critical Illness Insurance: Offers individual and joint MCII plans with competitive rates and customization options.
- RBC Insurance: Offers individual and joint MCII plans with flexible coverage options and online tools for managing your policy.
Life and critical illness insurance for mortgages
Mortgages are a significant financial commitment, and protecting yourself and your family in case of unforeseen circumstances is crucial. Life and critical illness insurance can offer valuable financial protection for your mortgage in different ways:
Life insurance
- Mortgage Protection: In case of your death, life insurance provides a lump sum benefit that can be used to pay off your outstanding mortgage balance. This ensures your family doesn't face financial hardship from the mortgage debt.
- Financial Security: The death benefit can also be used to cover other expenses, such as funeral costs, living expenses or debt repayment, providing financial security for your family.
Critical illness insurance
- Mortgage Coverage: If you're diagnosed with a covered critical illness, such as cancer, heart attack, stroke or multiple sclerosis, critical illness insurance provides a lump sum benefit. This money can be used to pay off your mortgage or other expenses, allowing you to focus on your recovery without financial worries.
- Income Replacement: The benefit can also supplement your income or replace it entirely if you're unable to work due to a critical illness.
Benefits of combining life and critical illness insurance
Combining both types of insurance offers comprehensive protection against both death and critical illness, ensuring your mortgage and family are financially secure.
Also, some insurers offer discounts when purchasing both life and critical illness insurance together. Moreover, having both policies under one roof simplifies administration and management.
Before buying any policy, you should compare prices from different vendors to get the best deal. Use our comparator and get rates and coverage details from leading Canadian companies that offer critical illness insurance for mortgages.
