What is Job Loss Mortgage Insurance? A 2024 Guide
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Did you know that in 2023, 31% of small to medium-sized companies throughout Canada reported lay-offs? The reasons behind the layoffs ranged from cutting costs to slowed operations and outsourcing work.
But, what can you do to protect yourself against job loss when the reasons for a company downsizing are completely out of your control? The answer is job loss mortgage insurance.
Job loss mortgage insurance can help protect your financial obligations and this article covers everything you need to know about the coverage, costs, and more. Use our free tool to compare mortgage insurance quotes from the best providers right here and start protecting yourself and your family today.
Job Loss Mortgage Insurance Canada: Key Takeaways
- It is also known as credit protection insurance
- The monthly benefits cover your monthly mortgage payments
- Premiums will likely decrease as you pay off your mortgage
- Is usually offered with disability coverage under a combined insurance policy
- Does not cover seasonal workers in the off-season
What is job loss mortgage insurance?
Job loss mortgage insurance is a type of credit protection insurance that will pay an insured’s mortgage payments should they lose their job. The insurance benefit will only be paid out if the policyholder is involuntarily made redundant, and not if they stop working willingly, or are fired because of some fault.
Good to know
In a nutshell, job loss mortgage insurance helps pay your mortgage if you lose your job unexpectedly. It only covers you if you’re laid off and not if you quit or are fired for a reason.
Job loss mortgage insurance is, therefore, highly sought after by individuals who work in industries prone to high staff turnover, lay-offs, and sectors that are heavily reliant on the economic cycle; sectors as technology, hospitality, and retail. This is because these sectors tend to let people go on short notice and without fault.
Many providers that do not offer job loss mortgage insurance as a standalone policy will likely offer it as an add-on to other credit protection products. For example, mortgage disability insurance is often combined with job loss as one disability and job loss mortgage insurance policy.
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Are job loss mortgage insurance and job loss insurance the same?
Job loss mortgage insurance specifically covers mortgage payments in case of involuntary job loss, aiming to prevent foreclosure. Job loss insurance provides broader financial support, covering living expenses during unemployment. The main difference lies in their scope of coverage: mortgage payments versus general expenses.
What does job loss mortgage insurance cover?
Job loss mortgage insurance in Canada covers an insured’s mortgage payments in the event of involuntary redundancy from employment. Specifically, the job loss mortgage insurance benefit will usually cover your monthly mortgage principal, any applied interest, property taxes, and additional premiums while you are unemployed.
If your job loss cover is an add-on for a normal mortgage life insurance or disability mortgage insurance plan, then the full premium will still be covered by the monthly benefit.
Good to know
You can check out our full guides on top mortgage life plans like Canada Life Mortgage Insurance and Sun Life Insurance to see if they meet your needs and budgets.
Job loss mortgage insurance benefits usually have a monthly maximum limit. While this maximum benefit varies, it usually caps out at around $3,500.
Furthermore, job loss insurance frequently comes with an elimination period, which is a predetermined time that has to lapse between the date of involuntary unemployment and the date when the insurance benefits kick in. For most insurance providers, this waiting period is usually 60 days.
Limitations and exclusions
As with all insurance solutions, some terms and conditions have to be met to gain coverage and to successfully claim on the policy.
- You have to be a full-time employee having worked a minimum consecutive 180 days
- Work for at least 20 hours every week and not calculated through averaging
- If self-employed, you have been working for an income and are registered to receive Canada Employment Insurance Benefits
- Unemployment during the off-season for seasonal workers is not considered a job loss
- Benefits won’t be paid if job loss occurs within 90 days from the insurance start date
- Benefits won’t be paid if an individual knows of an upcoming job loss
- Termination from contract work does not count as job loss
- Parental leave or a leave of absence due to medical issues
- Benefits aren’t paid for voluntary resignation or retirement
- Benefits aren’t paid where there is a cause for dismissal
Good to know
Your job loss mortgage insurance Canada plan will not cover your mortgage payments if medical reasons such as accidents or illnesses force you out of work. For this, you will need mortgage disability insurance. You can check out our guide on mortgage disability insurance plans and get free quotes here.
What are the advantages and disadvantages of job loss mortgage insurance?
Job loss insurance is advantageous to policyholders because it provides the insured with peace of mind. Peace of mind knowing that if they are let go from their workplace then certain financial obligations, such as mortgage payments, will continue to be met. There are several other pros and cons to job loss mortgage insurance as outlined below.
Pros
- Covers your financial mortgage obligations
- May stop you from defaulting on your mortgage
- Protects your credit score
- This lets you spend emergency savings elsewhere
- Covers the costs of other premium payments if the job loss cover is an add-on
- The premium will likely decrease as you pay off your mortgage
Cons
- Will have a maximum monthly limit
- Will only pay the benefit for up to 12 months, depending on the policy
- Pays your mortgage lender directly for your mortgage payments
- The insured does not receive any of the monthly benefit
- Job loss insurance will likely only cover a portion of your lost income
- Does not cover seasonal workers during the off-season or individuals fired with cause
If you think the advantages of job loss mortgage insurance outweigh the disadvantages, don’t hesitate to use HelloSafe’s mortgage insurance comparison tool to compare policies from the best providers in Canada.
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How much does job loss mortgage insurance cost?
While the actual cost of job loss mortgage insurance will differ between creditors and providers, a rough estimate can usually be calculated based on a borrower's age, their outstanding mortgage, and/or the combined monthly payment of your mortgage.
As mentioned, the actual rates come down to the provider and the policy considered. For example, Manulife's disability and job loss insurance combines the two and calculates the monthly premium rate per $1,000 outstanding mortgage balance. The table below shows the monthly premium rates depending on your age.
| Insured’s Age | Manulife Disability and Job Loss insurance premium rate |
|---|---|
| 18-29 | $0.14 |
| 30-35 | $0.17 |
| 36-40 | $0.18 |
| 41-45 | $0.20 |
| 46-50 | $0.24 |
| 51-55 | $0.30 |
| 56-60 | $0.40 |
| 61-64 | $0.62 |
For example
With Manulife’s disability and job loss insurance, if you are 35 and have an outstanding mortgage of $300,000, your premium rate would be $0.17 per $1,000. This means that your monthly disability and job loss insurance premium would be $51/month.
Conversely, Scotiabank calculates the job loss mortgage premium rate for every $100 of your monthly insurable benefit. The insurable benefit in this instance is the full amount of your monthly payment towards your mortgage, including additional fees. The table below shows the monthly premium rates per every $100 of monthly insurable benefit.
| Insured’s Age | Premium rate per insured per every $100 monthly benefit |
|---|---|
| 18-29 | $1.60 |
| 30-35 | $1.60 |
| 36-40 | $1.60 |
| 41-45 | $1.40 |
| 46-50 | $1.40 |
| 51-55 | $1.40 |
| 56-60 | $1.20 |
| 61-64 | $1.20 |
| 65-69 | $1.20 |
For example
Taking into consideration Scotiabank’s premium rates above, if an individual aged 35 had an all-inclusive mortgage payment of $2,100, their monthly insurance premiums would be $33.60.
Extra Costs
Note, that the premium that you calculate based on your monthly mortgage payments and premium rate may not be your final premium. Provincial taxes may be applicable depending on where you reside in addition to other premiums if the job loss cover is an optional add-on.
What is the best job loss mortgage insurance in Canada?
There are several leading providers in Canada that offer job loss mortgage coverage in one form or another. Whether they provide standalone coverage, or job loss insurance as part of a comprehensive credit protection insurance policy, you will have multiple options to choose from.
A few prominent providers in Canada with job loss mortgage cover include:
- Manulife and their Manulife One mortgage protection insurance policy includes disability and job loss insurance protection
- Scotiabank’s Scotia Mortgage Protection insurance includes job loss coverage as an optional add-on
- Canada Life’s Creditor Insurance policy includes job loss coverage
- Bank of Montreal (BMO) offers job loss coverage within several of their Mortgage Protection Insurance policies
Expert advice
Numerous credit providers such as Scotiabank and BMO aren’t necessarily insurance providers themselves. Instead, they partner with a well-known insurance company like Canada Life who develop insurance policies on their behalf which they then, themselves, sell to their clients.
You can compare quotes and coverage from Canada's best providers and find a plan that suits your unique needs right here using our free tool below. Click the button below and get free quotes now.
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Is job loss mortgage insurance coverage worth it?
It’s not always easy trying to determine if job loss mortgage insurance policies and providers are worth it to you. Especially, when job loss insurance is not available on a standalone basis, it can be a tough choice. This is because when this is the case, you will likely have to consider alternative insurance products, such as mortgage life insurance or mortgage disability insurance policies, and then decide on whether or not the addition of lob loss cover is worth the price.
However, if you work in an industry or sector where large-scale layoffs occur semi-regularly, then adding job loss insurance to a more conventional insurance product is worth it. Simply from the perspective that job loss insurance could cover up to a year's worth of mortgage payments while you are unemployed, should be worth the consideration in and of itself.
