When taking out your mortgage, your bank will require that you take out home loan insurance. This covers the risks linked to death, incapacity for work (partial or total, temporary or permanent) and loss of employment (unemployment insurance) – optional cover – for the borrower by taking over the loan repayment.
Death and disability insurance is compulsory
Guarantees against death or disability are the guarantees present in all contracts. Your home loan insurance will cover the reimbursement of the remaining capital due on your loan according to the quota (coverage rate), particularly in the event of death. Thus your heirs or your co-borrower will not have to bear the repayment by the borrower insurance of the loan contracted.
Know that your insurance takes into account incapacity for work. A distinction is then made between incapacity and invalidity.
Depending on your borrower profile, your contract and the guarantees included, the insurer will take charge of reimbursements in the event of a claim or accident. The price and overall cost of the insurance are linked to the different levels of cover taken out. For the same profile, the amount will be higher or lower depending on the level of guarantee chosen. Different insurances are thus offered, depending on the contracts:
- Death insurance, which covers the repayment of the loan in the event of the borrower’s disappearance. The heirs will not have to repay the mortgage.
- Total and irreversible loss of autonomy insurance (PTIA), the borrower has lost all his autonomy and needs to be assisted in his daily tasks; which is similar to a Disability 3rd category of social security 100%.
- Total permanent disability insurance (IPT), the insurer takes care of the monthly payments of the loan if the disability rate is higher than 66%.
- Partial permanent disability insurance (PPI), for this insurance guarantee, the rate of disability found is between 33% and 66%.
- Total temporary incapacity for work insurance (ITT), the borrower cannot exercise his profession temporarily.
- Professional invalidity insurance (IP), specific guarantee for the medical professions.
- Non-objective illness insurance (MNO), covers illnesses that cannot be identified by a doctor; that is, the doctor will not be able to objectively assess the patient’s condition. There are for example: depression, burnout, lumbago, etc.
Unemployment insurance is optional
“Loss of employment” insurance, or loss of employment insurance, is not compulsory. Optional, it can represent a high cost, having regard to the conditions for the exercise of guarantees (waiting period, deductible, maximum duration of compensation, amount paid, etc.).
In addition to benefit from it, you must meet, in most contracts, certain conditions.
- The job loss insurance only concerns employees.
- You must have been on permanent contract for more than a year and be the victim of an economic layoff.
- The amount of compensation and the duration of care are limited.
Check if this insurance applies to your situation before purchasing it.
Example of an insurance tariff with the job loss guarantee
|Borrower guarantees||Death + PTIA + IPT + ITT||Death + PTIA + IPT + ITT + Unemployment insurance|
|Total amount of insurance||$ 2,613.81||$ 6,712.43|
|Monthly payment||$ 10.89||$ 27.97|
|Average home loan insurance rate||0.09%||0.18%|