Who this is for
Anyone buying a home, especially a first home. This is for people being offered several insurance products at once by the lender, the lawyer or notary, and a broker. This guide separates them. It does not recommend any product.
The four products
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Mortgage default insurance (mortgage loan insurance). Required when the down payment is less than 20% of the price. Provided by CMHC, Sagen or Canada Guaranty. It protects the lender if you stop paying. The premium ranges from 0.6% to 4.5% of the mortgage depending on the down payment. CMHC’s table runs from 0.60% at 65% loan-to-value to 4.00% at 95%. It is 4.50% for a non-traditional down payment. It is usually added to the mortgage and interest is charged on it. Insured mortgages are available on homes priced up to $1.5 million.
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Mortgage life insurance (optional). Offered by the lender. You do not need it to be approved, and the lender must get your express consent. If you die, it pays the outstanding balance to the lender, not to your family. The amount covered falls as you pay the mortgage down, while the premium generally stays the same. The FCAC suggests checking existing coverage first and notes that term or permanent life insurance may provide better value. Related optional products cover disability, critical illness and job loss.
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Home insurance. Covers damage or loss to the home, and damage or theft of your belongings. Also covers your legal liability if someone is injured or their property is damaged. It includes additional living expenses if you cannot live in the home temporarily. A mortgage lender is usually listed as loss payee. The policy, not the mortgage, is what rebuilds the house after a fire.
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Title insurance. Covers losses from problems with the ownership of the property, including title fraud, where someone steals the title and sells or mortgages the home. It is usually bought once, at closing, through the lawyer or notary. In BC, the Land Title and Survey Authority’s assurance fund also compensates owners in the rare cases of registration error or title fraud. The LTSA offers free title monitoring. Ask your lawyer or notary what the policy adds in your case.
Which ones are tax-relevant
For a home you live in, none of the four is deductible. For a rental property or a rented suite, home insurance for the rented portion is a rental expense. The default insurance premium is a cost of borrowing with its own claiming rule. Title insurance and other closing costs form part of the property’s cost for a future capital gains calculation. Mortgage life insurance premiums are a personal expense.
How the pieces connect
Default insurance gets you the mortgage. Home insurance keeps the asset. Title insurance protects your ownership of it. Mortgage life insurance is one way to make sure the debt is cleared if you die. A personal life insurance policy is another. With a personal policy, the money goes to your family instead of the lender. The first-time buyer programs, the FHSA and the Home Buyers’ Plan are the tax side of the same purchase.
One thing many people do not realize
Mortgage default insurance does not protect you. The FCAC says it plainly: it protects the mortgage lender in case you cannot make your payments. You pay the premium, usually added to the mortgage with interest, because the lender would not lend with less than 20% down without it. It has nothing to do with what happens to your family if you die; that is a different product.
What to prepare
- The lender’s commitment letter, showing whether default insurance applies and its premium
- Any mortgage life insurance offer, with premium and coverage
- Your existing life insurance and workplace coverage
- The home insurance quote and the closing statement from the lawyer or notary
When professional help may make sense
A rental suite in the home, or a co-signer on title. A purchase near the $1.5 million cap. A decision between lender mortgage life insurance and a personal policy.
How Rex Tax may be able to help
We handle the tax side of the purchase. That covers the first-time buyer programs, the FHSA and Home Buyers’ Plan. It also covers the records to keep for a future sale or rental. Parminder Singh Oberoi can discuss life insurance through Punjab Insurance Agency Inc. Default, home and title insurance come from the lender, your insurer and your lawyer or notary.
Official sources
- Financial Consumer Agency of Canada: Down payment and mortgage loan insurance
- CMHC: Mortgage loan insurance cost (premium table)
- Financial Consumer Agency of Canada: Optional mortgage insurance products
- Financial Consumer Agency of Canada: Home insurance
- Financial Consumer Agency of Canada: Real estate fraud (title fraud and title insurance)
- Land Title and Survey Authority of BC: Title security in BC
This guide is general information, not advice about your situation. It reflects the rules for the 2026 tax year. It has not yet been reviewed by a practitioner. The information was checked against the official sources listed above on the date shown. Rules change. Check the official sources above or ask us. How we prepare these guides.