We get this question sometimes: Do I need to buy the optional life insurance or disability insurance that my bank is offering with my mortgage? The answer depends upon each person’s unique circumstances and the unique insurance that is being considered.

What is Covered by Mortgage Insurance?

It is helpful to look at one of the policies provided by one of the largest Canadian banks. Here is what they say is covered:

• Life Insurance covers you for the following covered events:
  • Death
  • Terminal illness
  • Accidental dismemberment
• Critical Illness Insurance covers you for the following covered events:
  • Cancer (life-threatening)
  • Acute Heart Attack
  • Stroke

This is pretty interesting. The life insurance is straightforward, meaning that if you die or otherwise suffer a covered injury, your mortgage payments would be covered or completely paid out.

However, the critical illness insurance is much less clear.

What Isn’t Covered by Mortgage Disability Insurance?

Most people would think that mortgage disability insurance will pay for their mortgage payments if they can’t work. This is pretty common sense. However, as outlined above, this policy only covers you for three things:

• Cancer (life-threatening)
• Acute Heart Attack
• Stroke

What if you’re in a car accident and get a concussion or mild-traumatic brain injury?

What if you fracture your leg and your shoulder, preventing you from working as a carpenter?

What if you’re a school teacher who can’t return to work due to an injury?

No, your mortgage will not be protected, because even though you can’t work, your injuries are not of the type covered by the policy. This is a very big problem for people and makes them feel like they didn’t have the insurance that they thought they did.

What Should I Do? Should I Buy Mortgage Insurance or Disability Insurance?

Maybe. This will depend on what other insurance you have, your risk factors, the amount of your mortgage, and the cost of the premiums.

The important thing, however, is to make sure you understand your coverage, because most people don’t look at the fine print until after a tragedy strikes—and by then, it’s too late.

ABOUT THE AUTHOR

Warren WhiteKnight is a Lawyer and Partner at Bergeron Clifford LLP. He is based in the firm’s Kingston office but travels throughout Eastern Ontario each week as clients’ needs require. He holds a Certified Civil Litigation Specialist designation by Law Society of Ontario.

Warren is a Queen’s Law graduate where he achieved top 10% standing all three years, and received numerous course prizes and scholarships. He has been the Past President of the Frontenac Law Association.

Warren regularly represents his clients in court and tribunal proceedings and has an excellent track record of achieving results both in court and in out of court settlements.

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