Your coverage at renewal, refinance, or when you move

Mortgages move more than people expect

Very few Canadians keep one mortgage, with one lender, untouched from purchase to payoff. Mortgage terms may range from a few months to five years or more, and at the end of each one you renew. Over a 25-year amortization that is five or six decision points, and each of them is a chance to move to a different lender.

Add the other ordinary events: refinancing to fund a renovation, selling and buying something bigger, a separation that changes whose name is on the title. Each is a moment when coverage tied to a mortgage has to be rethought, and easy to forget in the middle of everything else.

The document that answers every question below is the certificate of insurance. The Financial Consumer Agency of Canada's advice on credit and loan insurance is to ask your lender for it and read it; you do not have to be signed up to be given a sample.

What happens at renewal

Your lender has to tell you it is coming. A federally regulated lender must send a renewal statement at least 21 days before the term expires, showing the remaining principal, the interest rate, the payment frequency, the term, and any charges that apply. The agency's advice is to start shopping a few months out rather than waiting for that letter.

If you renew with the same lender, the mortgage continues and coverage arranged around it generally continues with it. The amount will have fallen along with the balance, which is the shape of the product, but nothing dramatic happens.

If you move to another lender, the picture changes. The new lender approves you on its own criteria, and the switch can carry setup fees, discharge, registration, transfer or assignment fees, and an appraisal. The old mortgage is discharged, and coverage written around that specific mortgage with that specific lender goes with it unless the certificate says otherwise. If you want protection at the new lender, you are starting again, at the age you are now and with whatever has happened to your health in the meantime.

What happens on a refinance

Refinancing usually means breaking the existing contract, and the agency is clear about the cost: if you break a closed mortgage contract, you normally pay a prepayment penalty, and that fee can cost thousands of dollars. Administration, appraisal, reinvestment and discharge fees can follow.

For coverage the mechanics are the same as a lender switch. The old mortgage ends, so an arrangement attached to it ends. The new mortgage is a new arrangement, applied for at your current age.

If the refinance makes the mortgage bigger

This is the case people miss, and it cuts both ways.

Coverage sized to a balance follows the new, larger balance, which sounds like an advantage until you notice that the premium follows it too, and that eligibility is assessed again on the new amount.

A policy you own does the opposite: it keeps paying exactly the amount you chose, which was sized to the old debt. Take $150,000 out to fund a renovation and your $500,000 policy is still a $500,000 policy. If the extra debt is permanent and your family would need it cleared, that is the moment to add coverage, either by increasing the existing policy where the contract allows or by adding a second smaller one. Both need fresh underwriting, so raise it at the refinance rather than years later.

What happens when you sell

Selling discharges the mortgage. Coverage attached to it has nothing left to be attached to. If you are buying again, there will be a new mortgage and, if you want it, a new arrangement with the new lender.

There is often a gap of weeks between the sale closing and the next mortgage funding. It is worth thinking about who is covered during it.

What an owned policy does through all of this

Nothing. That is the point, with one date in the calendar.

A policy in your own name is a contract between you and the insurer. It does not know who your lender is, what your balance is, or what your address is. You renew with a different lender, refinance twice, move cities and pay the mortgage off eight years early, and the policy keeps paying the same amount to the same person you named.

The date is the end of the term. A 20-year policy bought at 35 ends at 55, and that is the one event an owned policy does not absorb. Before it arrives you can renew at a premium set on your age then, convert to permanent coverage if you are still inside the conversion age limit in your contract, or let it end because the mortgage and the childcare years are behind you. Choosing a term is mostly about making sure that date lands after the years your family is exposed, rather than inside them.

The only other thing the policy asks of you is that the premiums keep being paid, which is why a pre-authorized payment from an account you actually use is worth setting up on day one.

The risk that builds quietly

The real cost of coverage that ends with each mortgage is not the paperwork. It is that you re-apply at intervals, and each time you are older, and at some point one of those applications runs into something in your medical history that was not there before.

Coverage bought once, in your own name, at the youngest age you will ever be, moves that risk to a single application. It is the same reason people are told to buy early: the decision gets more expensive and more uncertain the longer it waits.

What this means for you

Put a note in your calendar for three months before your renewal date, and make it about two things rather than one: the rate, and the coverage.

If your protection currently runs through your lender, read the certificate and ask in writing what happens to it if you move the mortgage, before you move it. And if you would rather not have this conversation at every renewal for the next two decades, see what a policy in your own name costs. It takes about two minutes, and for most people the number is the surprise that makes the rest of the decision straightforward.

For how the two products differ on every other point, the full comparison sets it out side by side.