4 Types of Mortgage-Related Insurance Every Homebuyer Should Know

Tim Lyon • September 18, 2025

Understanding the different types of insurance that come up in the mortgage process, and which ones you actually need.

Buying a home comes with a lot of moving parts, and insurance is one of those topics that often causes confusion. Some policies are mandatory, others are optional, and a few mainly protect the lender rather than you.

To make things easier, here’s a breakdown of the four main types of insurance you’ll hear about during the mortgage process — what they mean, when they apply, and how they affect you.


The Four Types of Insurance

  1. Default Insurance (CMHC, Sagen, Canada Guaranty)
  2. Title Insurance
  3. Mortgage Life Insurance
  4. Homeowner Insurance


Let’s go through each one.


1. Default Insurance

Often called “CMHC insurance,” this protects the lender if you default and your home sells for less than what you owe.

  • When it’s required: If your down payment is less than 20%
  • Applies to: Homes under $1.5 million
  • Cost: Added to your mortgage and paid over time
  • Key point: Even though it protects the lender, you pay the premium. Lenders sometimes offer slightly lower rates on insured mortgages, but the added cost usually makes them more expensive overall.


2. Title Insurance

Title insurance protects against ownership issues such as fraud, survey errors, or undiscovered problems with the property.

  • Lender policy: Usually required to protect the bank
  • Owner policy: Optional, but recommended since it protects you directly
  • Cost: One-time fee (often under $400) that covers you for as long as you own the property


3. Mortgage Life Insurance

This is life and disability insurance that covers the mortgage if you pass away or can’t work due to illness or injury.

  • Optional: Not required by your lender
  • Cost: Based on your age, health, and mortgage size
  • Note: As a broker, I offer Manulife MPP which is great for interim coverage since it kicks in right away and has a 60-day money-back guarantee. That said, I always recommend speaking with an insurance advisor to find a plan that’s best for you long term.



4. Homeowner Insurance

Also called property insurance, this protects the home itself against risks like fire, theft, or flooding.

  • Mandatory: Required by lenders before closing (if you are buying a condo, the strata insurance is likely sufficient for the lender but its always wise to look at adding your own to conver any gaps.)
  • Timing: Proof of insurance must be provided to your lawyer before signing final paperwork
  • Flexibility: You can shop around, but the policy needs to meet lender requirements


Why This Matters

Understanding these insurance types helps you:

  • Avoid surprises during the mortgage process
  • Know which costs are mandatory versus optional
  • Protect both your investment and your peace of mind


Real-World Example

A first-time buyer purchases a condo for $700,000 with a 10% down payment ($70,000).

  • Because their down payment is under 20%, they need default insurance. The premium (about $19,000) is added to their mortgage.
  • Their lawyer requires proof of homeowner insurance before closing, which costs about $1,200 per year.
  • The lender gets a title insurance policy, and the buyer also chooses their own for $200 to protect against fraud or defects.
  • The couple takes out interim mortgage life insurance (MPP), then later switches to independent coverage through an insurance advisor.

By knowing what each insurance covers, they’re prepared for every step of the process.


Quick Summary

• Default Insurance: Mandatory under 20% down — protects the lender
• Title Insurance: One-time cost — protects you against fraud and title issues
• Mortgage Life Insurance: Optional — covers the loan if you pass away or can’t work
• Homeowner Insurance: Mandatory — protects the property itself


Next Steps

If you’re getting ready to buy a home, take a little time to understand which insurances apply to your situation. Some are required, some are optional — but all play an important role in your financial plan.

If you’d like help navigating this process, I’m just a call or email away. Book a consultation or call 778-988-8409.


Mortgage Term Glossary

Amortization: The total length of time to pay off your mortgage (usually 25–30 years in Canada)

Default Insurance: Insurance required with less than 20% down, protecting the lender if you default

Down Payment: The upfront portion of the home price that you pay out of pocket

Equity: The difference between your home’s value and what you owe

Homeowner Insurance: Policy that protects your property against risks like fire, theft, and flooding

Mortgage Insurance: Life/disability coverage that pays your mortgage if you can’t

Mortgage Term: The length of your mortgage contract (typically 1–5 years)

Title Insurance: Insurance that protects against fraud or disputes over property ownership

 


Tim Lyon

Mortgage Consultant

Your Guide to Successfully Navigating the Housing Market

By Tim Lyon • September 18, 2025
Wondering If Now’s the Right Time to Buy a Home? Start With These Questions Instead. Whether you're looking to buy your first home, move into something bigger, downsize, or find that perfect place to retire, it’s normal to feel unsure—especially with all the noise in the news about the economy and the housing market. The truth is, even in the most stable times, predicting the “perfect” time to buy a home is incredibly hard. The market will always have its ups and downs, and the headlines will never give you the full story. So instead of trying to time the market, here’s a different approach: Focus on your personal readiness—because that’s what truly matters. Here are some key questions to reflect on that can help bring clarity: Would owning a home right now put me in a stronger financial position in the long run? Can I comfortably afford a mortgage while maintaining the lifestyle I want? Is my job or income stable enough to support a new home? Do I have enough saved for a down payment, closing costs, and a little buffer? How long do I plan to stay in the property? If I had to sell earlier than planned, would I be financially okay? Will buying a home now support my long-term goals? Am I ready because I want to buy, or because I feel pressure to act quickly? Am I hesitating because of market fears, or do I have legitimate concerns? These are personal questions, not market ones—and that’s the point. The economy might change tomorrow, but your answers today can guide you toward a decision that actually fits your life. Here’s How I Can Help Buying a home doesn’t have to be stressful when you have a plan and someone to guide you through it. If you want to explore your options, talk through your goals, or just get a better sense of what’s possible, I’m here to help. The best place to start? A mortgage pre-approval . It’s free, it doesn’t lock you into anything, and it gives you a clear picture of what you can afford—so you can move forward with confidence, whether that means buying now or waiting. You don’t have to figure this out alone. If you’re curious, let’s talk. Together, we can map out a homebuying plan that works for you.

Purchase Plus Improvements

By Tim Lyon • September 11, 2025
The best place to start the mortgage process is with a pre-approval. But once you’ve been pre-approved for a mortgage and you’ve been shopping with location in mind, what happens when you can’t find a suitable property? There's no doubt about it; finding the perfect property within your price range is a difficult task, especially for first-time homebuyers. So, before buyer’s fatigue sets in, maybe you should consider adding the cost of renovations into your purchase. Buying a property and including the cost of renovations into the mortgage is available through a program called purchase plus improvements. When purchasing a home, you can add the cost of home upgrades into your mortgage, making it a great option if you can’t find something move-in ready and aren’t afraid to do a little work! But while this sounds simple enough, in all honestly, it’s quite the process. There are some pretty strict rules to follow, but nothing that you can’t handle with the guidance of an independent mortgage professional. Here’s a quick overview of the process. Firstly, you must provide quotes to the lender ahead of time for the work you would like to complete. It’s good to note that the renovations will have to increase the value of the property accordingly. From there, the lender doesn’t give you the money to do the upgrades; you have to come up with that yourself. However, once the work has been completed and verified by an appraiser, the lender will reimburse you and include the money in your mortgage. This program isn’t for everyone. Buying a home is a stressful endeavour in and of itself. The added stress of having to undertake renovations right away might not be a good idea. But then again, if you have the financial wherewithal to handle the cost of renovations and like the idea of making it yours from the start, then this might be just the option you’ve been looking for! Please connect directly; it would be a pleasure to walk through the exact process and outline what securing a purchase plus improvements would look like for you!