When obtaining a mortgage in British Columbia, Canada, there are several types of insurance that may be required or recommended by lenders. These insurances are designed to protect both the borrower and the lender in different circumstances. Here are some common types of insurance associated with mortgages in BC:
1. Mortgage Default Insurance (CMHC Insurance): If your down payment is less than 20% of the purchase price of the home, lenders in Canada typically require mortgage default insurance. This insurance protects the lender in case the borrower defaults on the mortgage. Canada Mortgage and Housing Corporation (CMHC), as well as private insurers, provide mortgage default insurance.
2. Title Insurance: Title insurance is not mandatory in BC, but it is often recommended. It protects homeowners and lenders against any unforeseen issues related to the property's title, such as undisclosed liens, encroachments, or errors in the survey. Title insurance offers financial coverage for legal expenses and losses resulting from title-related disputes.
3. Homeowner's Insurance: While homeowner's insurance is not directly required by lenders, it is generally advisable and often a condition for mortgage approval. Homeowner's insurance protects the property and its contents from various risks, such as fire, theft, and natural disasters. Lenders want to ensure that their investment is protected in case of damage to the property.
4. Life Insurance or Mortgage Life Insurance: Lenders may offer or require life insurance or mortgage life insurance as part of the mortgage agreement. Life insurance provides coverage in the event of the borrower's death, ensuring that the mortgage balance is paid off. Mortgage life insurance is specifically designed to cover the outstanding mortgage amount in the event of the borrower's death.
It's important to note that specific insurance requirements can vary depending on the lender, mortgage terms, and individual circumstances. When obtaining a mortgage, it's best to consult with your lender or mortgage broker to understand their specific insurance requirements and recommendations.
Additionally, it's always advisable to review insurance options with a licensed insurance professional who can guide you in selecting appropriate coverage for your specific needs.