Having insurance is meant to protect you from all of the ‘what-ifs’ life might throw at you and your family. But do you really understand the various types of insurance available to you as a homeowner, landlord, or tenant in Ontario? In Ontario alone, there are at least six different types of insurance obtainable to consumers. For an in-depth analysis of landlord insurance, renters insurance, and high ratio insurance, be sure to click on over to Understanding Different Types of Real Estate Insurance: Part I. Otherwise, this article will be covering mortgage insurance, home insurance, and title insurance, and, more specifically, what to expect with each one, who and what the policies cover, and if coverage is mandatory in Ontario. 

MORTGAGE INSURANCE

Mortgage insurance will protect your family from financial hardship and allow them to keep their home if you cannot make payments due to a critical illness or untimely death. However, there are two very different ways mortgage insurance works, and it is crucial to understand the difference before purchasing either. 

The first main way of insuring your mortgage is by securing a mortgage loan or default insurance from a lender. With this coverage, the policy would be used to pay off some or all of the remaining amount owed on the mortgage to the lender in the case of your death. Having the mortgage mostly paid off or in full means your family can continue to live there without any further undue financial stress. However, your family may have more financial needs than just paying the mortgage and mortgage insurance doesn’t leave any money for your family. For these reasons, some homeowners may opt for the second available option. 

The second way of insuring your mortgage is through a mortgage life insurance policy from an insurance company that offers your family or beneficiary a certain amount of money if you were to die. In this case, your beneficiaries would receive a tax-free amount of money called the death benefit. An advantage to this option is that your family can use the funds to cover any financial burdens they might be facing, including but not limited to the mortgage. Furthermore, the amount paid out to your beneficiary is the full amount insured, not just enough to cover the remaining mortgage amount to the lender. Although mortgage insurance is not mandatory in Ontario, it is a good idea for those who want to ensure that their family is protected in the case that something fatal happens. 

HOME INSURANCE

Traditional home insurance is arguably the most common type of real estate insurance that consumers know about. Although it is not legally mandated that properties in Ontario are insured with home insurance, most lenders will require that mortgaged homes be covered, meaning it is necessary in many cases. Home insurance is also a good idea considering your house is one of the most significant investments you will make in your lifetime and is worth protecting. There are three major facets covered by a home insurance policy: the house, contents of the home, and your personal liability. 

Home insurance not only insures the house itself if something were to happen to it like fire, flood, or tornado, but it also insures your personal contents within the home. The policy will cover all of your possessions in the event your items are damaged, stolen, or lost due to a covered incident. Furthermore, it is recommended to increase your home insurance coverage to the total cost it would require to rebuild the home and replace the contents in the case of a disaster. By increasing your coverage, you can ensure that you are as protected as possible in these extreme scenarios and that you can get re-established without having to worry about paying any differences in premiums. 

The last thing that home insurance covers is your personal liability which means that if an accident were to occur on your property you could be held responsible, and the policy will protect you from this. An incident on your property could result in damages, medical expenses, and undue financial stress, which is why home insurance includes this in their coverage. Overall, having home insurance is advised even if your home is paid off so that you are covered in the case of any unforeseen accidents. 

TITLE INSURANCE 

Title insurance is a policy that protects residential or commercial property owners and their lenders against losses related to the property’s title. Once you decide that title insurance is right for your situation, you only pay a one-time premium, and then you are covered for the entire length of time that you own your house. Similar to the other types of insurance, title insurance is not required in Ontario, but it can protect you from a number of potential losses when purchasing a residential or commercial property. 

Some of the losses that title insurance protects from are unknown title defects, existing liens against the property’s title, encroachment issues, title fraud, or other title-related issues. However, title insurance is not a home warranty or home insurance policy, so it will not provide compensation for non-title-related issues. So, while the policy would protect you from something like debts secured against the property from the previous owner, it would not cover things like floods, fires, or sewer backups that occurred on your property.