Creditor Insurance for Mortgage Loans in Alberta

Many homeowners in Alberta take out creditor insurance when taking out a mortgage. This added layer of financial protection is important for homebuyers.

This type of insurance offers a lump sum payment or regular monthly payments towards your mortgage in case of illness or death.

This safety net can ensure your dependents or loved ones don’t have to worry about losing their home if something unexpected happens to you.

Credit protection will give you peace of mind with the assurance that your family will not be burdened by payments for your mortgage loan.

If you want to find out more about creditor insurance for mortgage loans, keep on reading this article. You can also compare creditor insurance quotes from top insurers by filling out the free form on this page.

What is creditor insurance and how does it work?

Creditor insurance covers mortgage payments when something unexpected happens that would prevent you from paying your debts.

These unforeseen events include:

Illness
Job loss
Injury
Death

By subscribing to creditor insurance, the insurer agrees to make your mortgage payments for a specified period if these insured risks occur.

The maximum amount and the number of payments as well as other terms and conditions differ among insurers. The benefits will depend on the lender and the loan product covered.

What can you insure with creditor insurance? Most people insure their mortgage with creditor insurance as it is, perhaps, the biggest financial obligation that Canadians have. You can also cover other loans including line of credit, and credit card balances.

Creditor insurance is also called mortgage insurance, loan insurance, or balance protection insurance. It is not mandatory unless you are buying a house with less than a 20% down payment.

The Benefits of Creditor Insurance for Mortgages

By having creditor insurance you can eliminate the stress of worrying about how to make your mortgage payment if you suddenly face financial difficulties.

What significant benefits can you get from creditor insurance?

Peace of mind
Financial security
Convenience

Relatively speaking, the claims process of creditor insurance is simpler than other types of insurance as it is generally tied to your lender. You can choose the coverage amount and term that best suits your needs.

You can also choose options such as job loss, disability, or death and how long you want to be covered.

You will never have to fall behind on your mortgage with creditor insurance.

Types of Creditor Insurance for Mortgages

Creditor insurance comes in several types. Understand each option to find the right one for your needs.

Mortgage Life Insurance

Mortgage life insurance will pay off the balance of a mortgage if the borrower dies. The cash benefit is paid directly to the lender, not the family of the insured.

The amount of coverage also decreases as the balance of the mortgage goes down. This insurance product is offered by your lender or bank at the time of application.

Mortgage Critical Illness Insurance

This type of coverage pays off your mortgage if you get diagnosed with a critical illness that is covered in the policy.

It is a one-time, lump sum payment and has a maximum amount as specified in your policy.

Mortgage Disability Insurance

Mortgage disability insurance will cover your monthly mortgage payments in the event you suffer a disability and cannot work. The payments will be made for a specified period, i.e. 24 months, or until you can return to work, whichever comes first.

Mortgage Job Loss Insurance

This type of insurance coverage will pay for your mortgage if you lose your job. It is set for a certain number of months and could have strict eligibility requirements.

As you can see, creditor insurance for mortgage loans in Alberta covers the most usual scenarios that could prevent you from paying for your mortgage loan.

It is an optional loan insurance product that will provide you and your family with a financial safety net during a difficult time.

The Cons of Creditor Insurance

Creditor insurance is designed to protect the lender in case something bad happens to the borrower. In short, while it ensures your mortgage is paid off, your family does not receive anything from your policy.

What are the main disadvantages of creditor insurance?

No flexibility: The policy pays the lender, not the family. Your loved ones can’t use it for their needs.

Higher Cost: Creditor insurance is more expensive. Premiums don’t change even as your mortgage is paid down.

Risk of denial: As underwriting is done only when a claim is made, your claim can be denied if you are found to have a pre-existing condition.

It is also worth noting that creditor insurance is tied to your lender. You will lose coverage if you change lenders. You have to re-apply for coverage if you move your mortgage.

Creditor Insurance: Is it the same as Life Insurance?

The purpose of creditor insurance and life insurance are similar but they both have distinct qualities that make them unique.

You should try to understand how they differ so you can decide which one is right for you.

Simplicity

Creditor insurance can usually be obtained when you sign a loan or mortgage. The premiums are added to your monthly mortgage payments.

In contrast, life insurance is a more complex process that takes longer to complete. You pay premiums to a life insurance company, not your lender.

Eligibility Criteria

When you buy creditor insurance, you would typically be approved for coverage by answering a few health-related questions. However, this type of insurance uses post-claim underwriting. It means that when you or someone makes a claim, the insurer will examine your medical history. If it is revealed that you have a health condition, your claim could be denied.

Life insurance may be harder to qualify for. You may need to undergo a medical exam. If you have pre-existing conditions, you could be denied coverage or your premiums may increase.

But if you are approved for coverage, your dependents are sure to receive the cash benefits as long as your policy is active.

Beneficiaries

Credit insurance protects your mortgage lender. All benefits go directly to the lender. Your protection also ends when your mortgage is paid off. The coverage amount is tied to your mortgage balance.

In contrast, life insurance allows you to choose your beneficiaries. They decide how to use the cash benefits, including paying off the mortgage.

Adaptability

Creditor insurance allows no flexibility – it can only be used to pay off your debt with the lender.

Life insurance is more flexible in terms of who your beneficiaries are and how to use the insurance proceeds. If your debts have diminished over time, the remaining cash benefits can be used for other loans or expenses.

Portability

Your creditor insurance coverage will end if you change lenders or sell and buy another house. You will need to reapply for mortgage insurance.

Life insurance coverage stays with you whether you change lenders or sell and buy a different property. This is because your life insurance policy is attached to you and not your lender.

Amount of Coverage

With creditor insurance, the amount of coverage depends on your mortgage amount. As years go by and your mortgage balance diminishes, your coverage amount also goes down.

With life insurance, you can choose to exceed the mortgage amount. Your dependents can have money to help with their expenses or maintain the lifestyle they have become used to.

Cost of premiums

The cost of creditor insurance is typically higher than term life insurance. Depending on the policy, the premiums may stay the same and they won’t go down even when your mortgage balance goes down.

With life insurance, the premiums depend on your age, the term of coverage (10 or 20 years), your health status, and the desired amount of coverage.

What if I already have life insurance?

If you already own a life insurance policy, it makes sense to just increase your coverage to cover your mortgage. If you don’t have a life insurance policy now, it may be the right time for you to get coverage.

If you don’t qualify for life insurance, creditor insurance may be the right option for your mortgage protection.

Would you like to compare prices? Fill out the short online form on this page and our partner brokers will be happy to assist you.

How much is creditor insurance in Alberta?

The cost of creditor insurance for mortgage loans in Alberta depends on factors like:

Type of coverage;
Mortgage balance;
Age:
Choice of insurer.

Creditor insurance is generally more expensive than life or disability insurance.

How do creditor insurance premiums compare to alternative mortgage protection products? Take a look at the average prices in the table below.

Creditor Insurance	Term Life Insurance	Critical Illness Insurance	Permanent Life Insurance	Disability Insurance
$40 to $80	$30 to $100	$50 to $150	$60 to $1,000	$25 to $60

*These figures are not actual quotes from our partners and are for illustration purposes only.

Please keep in mind that the premiums will vary depending on the insured’s age, desired coverage amount, and type of policy.

Is Creditor Insurance a good option for a mortgage?

Creditor insurance is convenient and easy but it is not always the best option for mortgage protection.

Many individuals go with term life insurance or critical illness insurance as these products are:

More flexible;
Has fixed amounts of coverage;
Benefits the insured, not just the lender;
Potentially lower premiums for most borrowers.

What are the alternatives to creditor insurance?

Term life insurance
Permanent life insurance
Critical illness & Income replacement insurance
Disability insurance

Not everyone will qualify for life insurance or critical illness insurance. Thus, creditor insurance remains a viable option to consider for mortgage protection.

Find out if you qualify for life insurance for mortgage protection by reaching out to our insurance partners! Just fill out the short online form to receive free and no-obligation quotes.

FAQs explaining Creditor Insurance for Mortgages

Are you looking for mortgage protection in Alberta? Are you uncertain if it is your best option?

Hopefully, the FAQs we have answered below will help you come to the best decision in your situation.

How can you get creditor insurance for a mortgage?

You can get creditor insurance from your lender or bank during the mortgage application process. The premiums will depend on the amount of coverage. You can automatically be enrolled by your lender for coverage and the premiums will be added to your mortgage payments.

Can I cancel creditor insurance if I have a mortgage?

You have the option to cancel creditor insurance as it is not mandatory. Check your insurance policy on the steps to cancel the coverage. Your lender may ask for alternative coverage for your mortgage to protect the bank in case you default on your mortgage.

How can I protect my mortgage?

If you are worried about an unforeseen event that would prevent you from meeting your mortgage payment, creditor insurance can be your safety net. In case of illness, disability, or death, your policy can pay for your mortgage. Depending on the policy you choose, your insurer will pay a lump sum amount of monthly payments.

Do I need creditor insurance if I have life insurance?

If you have life insurance with adequate benefits to cover your existing mortgage, you probably don’t. You can also apply to increase your coverage.

Creditor insurance can also complement your existing insurance coverage. It can fill the gaps so that your dependents can use the benefits for important expenses without worrying about the mortgage balance.

Who should get creditor insurance for a mortgage?

Not everyone has adequate life insurance. Many individuals also find it hard to qualify for life insurance coverage due to health conditions or high-risk occupations or lifestyles.

Creditor insurance is a convenient option to cover a mortgage to protect financial stability. If you have an existing mortgage and other debts, you may want to consider creditor insurance for mortgage protection.

Who owns my creditor insurance policy?

Your lender owns the policy. The payout goes directly to your lender.

If you have other questions regarding creditor insurance or other mortgage protection products, connect with our insurance partners!

Compare creditor insurance and other mortgage insurance types to save time and money. Simply connect with our insurance partners using the short online form below at no cost!

What is your best option for mortgage protection in Alberta?

Mortgage protection insurance ensures you will never lose your home, protects your credit, and ensures your loved ones are not burdened with mortgage payments.

As a homeowner, you have several options to make that happen by taking the first step to protect your mortgage.

Creditor insurance is not the best option for many people due to its higher cost, decreasing coverage, and benefits only the lender. It is not mandatory for you to accept your lender’s mortgage insurance product to get a mortgage.

You have the right to compare your options to find the right one that suits your needs and goals.

Would you like to get personalized quotes to compare your mortgage protection options? Fill out the short online form on this page.

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