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My Mortgage Blog

The short answer is no.

It may seem like a morbid thought, but the fact is, for most people, their mortgage is the largest debt they’ll carry in their lifetimes.

As a result, many invest a lot of time and effort into finding the best and most cost-effective mortgage product. That usually means searching for the lowest cost and the most flexible features that are right for their needs. 

In contrast, many tend to put comparatively little thought into what could happen to the mortgage in the event of their death.

Would the primary mortgage holder’s family be able to continue making the payments? Would they be forced to sell the house?

An Ipsos poll conducted during the pandemic found that more than a quarter of Canadians (26%) aren’t confident that their families would be able to take over their mortgage/rent payments and other housing costs if they were to die or fall ill. That percentage rises to nearly a third (32%) for borrowers aged 35 to 54.

"While a majority of Canadians express confidence in their family’s ability to manage financially without them if they were to pass away without life insurance, there remains a significant portion of Canadians who are not confident in their family’s ability to manage,” the report reads.

How can mortgage borrowers plan for the future?

Taking out insurance is one of the best ways to financially protect loved ones in the event you’re no longer around to do so.

But what’s the best insurance to get? Is basic life insurance sufficient, which pays out a lump sum of money to your heirs, or should you opt for Creditor Life Insurance (CLI), which would pay off your outstanding mortgage balance?

On the one hand, CLI is often easy to obtain and can usually be added to your mortgage after completing a short-form application.

The premium for CLI depends heavily on your age, health and outstanding mortgage balance and is based on the answers to some health questions and, in some cases, a short-form interview. CLI also applies strictly to your mortgage and (optionally) Home Equity Line of Credit balances and wouldn’t cover any other non-mortgage debts.

Term or Whole Life insurance, while often a more involved application and medical process, pays out a lump sum that gives the borrower’s family the financial freedom to do as they wish with the money, including paying off the mortgage balance or non-mortgage debts.

CLI is basically in force and available for the life of the mortgage, whereas basic life may be for a fixed term.

The pandemic put renewed focus on this aspect of mortgages, illustrating how quickly life can change and how those changes are often out of our control.

More than half of parents (56%) say they are now having these important conversations about their children’s future, according to Ipsos. Are you?

It’s important to consult an expert to discuss which option may be best for your circumstances.