Mortgage insurance in Canada includes mandatory default insurance for down payments under 20% (protects lender) and optional mortgage protection/life insurance (protects borrower’s family). Default insurance, such as through CMHC, is required for high-ratio mortgages. Optional insurance covers payments if you die or become ill.

Mortgage Default Insurance (Mandatory): Required if your down payment is less than 20% of the home’s purchase price. It protects the lender if you default. It allows you to buy with as little as 5% down. The premium is usually added to the mortgage amount, meaning you pay interest on it.

Optional Mortgage Insurance (Creditor Insurance): This is optional, creditor-offered insurance that can help pay off or cover your mortgage payments in the event of your death or critical illness. This is not required for mortgage approval.

Providers: Major default insurers in Canada include Canada Mortgage and Housing Corporation (CMHC)

Costs: Default insurance premiums are based on the size of your down payment and are calculated as a percentage of the mortgage, added to the loan balance.

Alternatives: Optional mortgage life insurance can be replaced by personal term life insurance, which often provides more flexibility and keeps the payout under your family’s control, instead of directly to the lender.