Mortgage Disability Insurance in Canada: 2024 guide
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Discover the methodologyMortgage disability insurance is a specialized form of coverage that ensures your mortgage payments are taken care of if you become disabled and unable to work. It is crucial for safeguarding your home and financial stability during unexpected life changes.
Given the high cost of mortgages and the financial strain of lost income during disability, this insurance can be a worthwhile investment. But how does it work? What does it cost? Is mortgage disability insurance worth it?
Read on to learn all about the importance of mortgage disability insurance. Don't forget to use our free tool to compare the best disability insurance plans and get free quotes right here.
Mortgage Disability Insurance Canada: Key Takeaways
- Mortgage disability insurance covers mortgage payments if disabled.
- Benefits start after a 60 or 90-day waiting period.
- Automatic approval with 'No' answers on application, no medical checks needed.
- Benefit limit around $3,000/month, varies by provider.
- Different from mortgage life insurance, but some life policies offer disability cover as an add-on.
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The iA Financial Group's Superior Program offers maximum coverage of $120,000 and covers professional classes from 4A to C. With a minimum work time of 21 hours per week, this insurance does not require a minimum pre-tax income. It stands out with non-taxable monthly benefits and a vocational rehabilitation program. Ideal for newcomers, it includes four optional riders and can be renewed up to the age of 70.
Beneva's Disability Insurance offers a maximum coverage of $72,000 and covers professional classes from 4A to B without requiring a minimum income. Renewable until the age of 65, this plan stands out with its premium refund feature and the possibility of combining with group insurance. It includes four optional riders and does not require a medical questionnaire, offering great flexibility.
Canada Life's The Independence Protection Insurance offers maximum coverage of $300,000, one of the highest in the market. It covers professional classes from 4A to B and requires a minimum net income of $35,000 per year. This plan includes 13 optional riders, a partial disability option, and flexible benefit periods of up to 120 months. Non-cancellable until age 65, it is suitable for part-time and seasonal workers without a medical questionnaire.
What is mortgage disability insurance?
Mortgage disability insurance, sometimes referred to as credit protection insurance or mortgage protection insurance, is a type of private insurance policy that covers the insured individual’s mortgage payments if they suffer from a disability that forces them out of work.
Mortgage disability insurance is often sold by financial institutions, mortgage brokers, and lenders to clients when they apply for a mortgage. The monthly benefits received from the insurance can provide significant peace of mind to individuals and couples who are buying a property as they’ll know that any mortgage payments will be covered if they cannot work for a certain period of time.
Homeowners do not have to buy mortgage disability insurance when they purchase a property or take out a loan. The insurance can be purchased at any time, so homeowners can wait until they’ve had time to review multiple options to find a policy that suits their needs.
You can explore the best disability insurance options in the market based on your unique needs right here. Use our free tool below to compare plans, customize coverage, and get personalized quotes.
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Is mortgage disability insurance the same as mortgage insurance?
Mortgage disability insurance should not be mistaken for mortgage insurance. The former is a private insurance plan purchased by individuals who have a mortgage, whereas mortgage insurance refers to government-mandated insurance required by individuals who purchase a property with a 20% or less down payment.
How does mortgage disability insurance work?
Private mortgage disability insurance works by paying a policyholder’s mortgage lender if and when the insured person becomes disabled and can no longer work.
By paying the mortgage provider directly, mortgage disability insurance benefits bypass the insured and ensure that their financial obligations towards the lender are maintained, which in turn guarantees that the policyholder does not default on their mortgage.
Furthermore, the disability benefits continue to contribute to the insured’s home equity, meaning that the policy doubles as a financial planning tool whereby the policyholder’s future financial situation isn’t jeopardized if their income stream disappears.
Just like all insurance products, mortgage disability insurance plans vary depending on the insurance provider and plan chosen. Commonly, however, mortgage protection will include the following benefits and conditions:
- Coverage ranges from 50% to 100% of regular mortgage payments
- Sometimes have a maximum coverage of $3,000-$5,000 per month
- Benefit payments made up to a maximum of 24 months or up to a limit of $150,000 per disability
- Have a 30 or 60-day elimination (waiting) period
Pros of mortgage disability insurance
- Financial protection: Mortgage disability insurance provides financial security by covering mortgage payments if the policyholder becomes disabled and unable to work.
- Peace of mind: It offers peace of mind to homeowners, knowing that they won’t default on their mortgage should they lose their income due to a disability.
- Flexibility: Some policies offer flexibility in terms of coverage and benefits, allowing homeowners to tailor the insurance to their specific needs.
- No medical exam: Where an applicant is in good health, mortgage disability insurance can be automatically approved without the need for a medical exam.
Cons of mortgage disability insurance
- Cost: The premiums for mortgage disability insurance can be high depending on the applicant's age which may deter homeowners from the additional safety net.
- Coverage limitations: Some policies may have limitations on the types of disabilities covered as well as the duration of coverage, potentially leaving homeowners without sufficient protection.
- Exclusions: Like all insurance, certain pre-existing conditions may be excluded from coverage, which in turn limits the scope of protection.
- Claim approval process: Depending on the quality of the insurer, some policyholders may encounter challenges when it comes to claims.
Consider the pros and cons and find a plan that suits you best right here. Explore the best disability insurance plans in Canada and get quick and free quotes now.
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What are the best mortgage disability insurance plans in Canada?
The top mortgage disability insurance plans in Canada will provide all of the advantages of the insurance to policyholders while limiting their exposure to any disadvantages. Furthermore, your unique reasons for wanting mortgage protection will ultimately determine which plan is most suitable for you.
However, here are some best mortgage disability insurance plans:
- Manulife mortgage disability insurance
- RBC mortgage disability insurance
- CIBC mortgage disability insurance
- Scotiabank mortgage disability insurance
- BMO mortgage disability insurance
Manulife mortgage disability insurance
- Coverage up to $10,000/month for 24 months in case of total disability.
- No waiting period for coverage activation.
- Flexible payment options: monthly, semi-monthly, or weekly.
- Supplements existing insurance coverage.
- Eligibility: Canadian resident, 18-64 years old, involved in a residential mortgage.
- Can be combined with mortgage life insurance.
- For more details, visit Manulife's website.
RBC mortgage disability insurance
RBC's Mortgage Disability Insurance, part of its HomeProtector Insurance, offers the following features:
- Coverage for regular mortgage payments in case of disability.
- Maximum coverage is up to $3,000 monthly for up to 24 months.
- Eligibility includes being a borrower, co-borrower, or guarantor of an RBC mortgage, aged 18-65, and a Canadian resident.
- Automatic enrollment upon application, with a 30-day review period for cancellation.
- Premiums are based on age and mortgage amount at application time.
- No medical exam required for most cases, with health questions on the application.
- For further details, please visit RBC's HomeProtector Insurance page.
CIBC mortgage disability insurance
- Covers up to $3,000/month for 24 months, maximum $150,000 per incident.
- 60-day waiting period before benefits start.
- Premiums vary based on age, application date, benefit amount, and rates.
- Eligible for Canadian residents aged 18-64 with a CIBC mortgage.
- Underwritten by The Canada Life Assurance Company.
- Optional, not required for other CIBC products or services.
- For more information, visit the CIBC website.
Scotiabank disability insurance
- It covers your Scotia Mortgage account payments if you become disabled, up to $3,500 per month for a maximum of 24 months per disability, per mortgage, after a 60-day waiting period.
- Eligibility is for Canadian residents aged 18-64 who are borrowers, co-borrowers, or guarantors on a Scotiabank Mortgage account.
- Premiums are based on your age and the amount of your mortgage at the time of application.
- The plan includes a 30-day review period where you can cancel for a full refund of any premiums paid.
- For more detailed information, please visit Scotiabank's Mortgage Protection page.
BMO mortgage disability insurance
- Coverage for mortgage payments in case of injury or covered illness.
- Option to choose 50% or 100% coverage, up to $3,000 monthly.
- Benefits paid for up to 24 months per disability.
- 30-day qualifying period before benefit starts.
- Eligibility: Regularly work 30+ hours/week, Canadian residents, 18-65 years old, borrowers or co-borrowers on a mortgage.
- For more detailed information, please visit the BMO Mortgage Protection Insurance page.
It is essential to compare multiple plans before settling on one. Use our free comparator below to explore the best mortgage protection plans and get free quotes right now.
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When do mortgage disability insurance benefits end?
Unfortunately, mortgage disability insurance benefits do not last forever. They exist to cover your mortgage payments while you are unable to work so can focus on rehabilitation and getting back on your feet.
In addition to the 24 months per disability coverage restriction mentioned above, disability mortgage insurance benefits will also come to an end at the earliest onset of one of the following:
- Your mortgage has been paid back in full
- When you can go back to work
- You receive other sources of income as a wage
- You pass away
- You do not complete medical examinations as requested by the insurer
- No longer under the continuous care of a medical practitioner approved by your insurer
Importance of Disability Insurance Lawyers
Insurance providers often deny disability claims on the basis that certain conditions don’t render an individual unable to work, even when they clearly cannot carry on their daily activities. Don’t shy away from hiring a disability insurance lawyer to help you overturn an unfair claim decision!
Who is eligible for mortgage disability insurance?
On the date of application, the majority of insurance providers require mortgage disability insurance eligibility applicants to be:
- Between the ages of 18 and 65
- A listed borrower or co-borrower on a mortgage
- A Canadian resident
- Actively employed (or self-employed) for 30+ hours per week
- Not actively at work but the reason for not working due to being
- On parental leave
- A seasonal worker applying for coverage during the off-season and expects to return to the same employment when the season begins
How much does mortgage disability insurance cost?
One of the best things about mortgage disability insurance is that the premiums are often transparent and readily available to potential clients. This is because the premiums are calculated using three factors: an applicant’s age, the fixed monthly benefit, and the premium rate.
The table below shows the current CIBC mortgage disability insurance premium rates per $100 of the fixed monthly benefit.
| Age | CIBC Mortgage disability insurance premium rate per $100 |
|---|---|
| 18-29 | 1.35 |
| 30-35 | 1.70 |
| 36-40 | 2.15 |
| 41-45 | 2.80 |
| 46-50 | 3.45 |
| 51-55 | 4.45 |
| 56-60 | 5.50 |
| 61-64 | 6.00 |
So, to calculate your specific disability insurance mortgage premiums you will have to divide your fixed monthly benefit by 100 and then multiply it by the premium rate as determined by your age. For example, an individual aged 33 with a fixed monthly benefit of $1,500 will have a mortgage protection insurance premium of $25.50/month.
CIBC Multiple Borrower Discount
With CIBC mortgage disability insurance, multiple borrowers on the same loan will receive a 5% discount on the single premium rate.
We recommend that you get individual quotes to help you find a policy that suits all your needs. Use our free comparator tool below to compare the best plans in the market and get free quotes.
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Is mortgage disability insurance worth it?
If you’ve come this far and you’re still wondering whether you need mortgage disability insurance or not, you should consider asking yourself the following questions.
- Do I have existing insurance coverage that includes some form of disability protection?
- What is my current financial situation and will I be able to pay my mortgage for up to 24 months without receiving any income?
- Am I less likely to suffer a disability than the average Canadian?
- Would I be fine with the thought of selling my property if I do suffer from a disability that stops me from working?
If you answer ‘No’ to any or all of these questions, then you should seriously consider working some form of mortgage protection insurance into your financial plan. Remember, statistics show that 1 in every 4 Canadians will likely be unable to work for at least 1 full year before reaching retirement age.
What is the difference between mortgage life and mortgage disability insurance?
The difference between mortgage life insurance and mortgage disability insurance is that the former will only pay off the remaining mortgage loan in full if the borrower passes away. In contrast, the latter will pay the monthly benefit towards the ongoing mortgage payments if the policyholder becomes disabled.
Another way to phrase this is that mortgage life insurance provides financial security for your dependents. It ensures that your family can continue to live on their property after you pass away without the burden of continued mortgage payments.
On the other hand, mortgage disability insurance will cover mortgage payments if you become disabled, so that you can focus on rehabilitation without having to worry about defaulting on your loan.
As can be seen from this, both insurance plans serve a completely different purpose and the insurance benefit is paid out at two different times. It may be difficult to determine if mortgage life insurance or mortgage disability insurance suits you better. So, if your budget can stretch, it may be worth considering a mortgage life insurance plan that offers disability insurance as an optional add-on.
