Buying your first home is a big milestone — for many Canadians, it’s also their biggest financial commitment. Between saving for a down payment, navigating mortgage approvals and planning for move-in day, there’s a lot to juggle, but buying a home can be a great opportunity to build financial literacy.
If you're a first-time buyer, understanding how insurance fits into your financial plan can help you make smart decisions now and protect your investment into the future.
The True Cost of Homeownership
Most people focus on the down payment — while that’s a major hurdle, it’s just the beginning. Once you own a home, you’ll be responsible for a number of ongoing expenses, including:
- Mortgage payments: The principal and interest. The payments can vary if you have chosen a variable rate mortgage or will remain the same throughout the term of your mortgage if you chose a fixed rate.
- Property taxes: These can be paid directly or rolled into your monthly mortgage payments.
- Utilities and maintenance: Heating, electricity, water and home repairs can quickly add up.
- Home insurance: A must-have to protect your investment and typically required by your lender.
Understanding these costs is key to building a budget that works for your lifestyle.
What Is Mortgage Insurance — and Do You Need It?
Mortgage insurance can mean two very different things in Canada.
Mortgage Default Insurance (also called CMHC insurance)
If your down payment is less than 20%, mortgage default insurance is mandatory. It protects your lender in case you default on your loan. It’s usually provided by the Canada Mortgage and Housing Corporation (CMHC).
You don’t pay this insurance as a monthly premium — instead, the cost is added to your mortgage and paid off over time. It makes homeownership more accessible for many Canadians, but it does increase your overall cost.
Mortgage Life Insurance
This is optional — and it’s designed to pay off your mortgage if you die before it’s paid off. While it may sound like a good safety net, it’s not always the best choice. Instead, many financial advisors recommend term life insurance as a better, more flexible option.
If you have a family or financial dependents, term life insurance offers broader and more flexible protection. It can cover funeral expenses, loss of income, your children's education and more — not just your mortgage.
Mortgage Life Insurance vs. Term Life Insurance
| Feature | Mortgage Life Insurance | Term Life Insurance |
| Purpose | Pays off your mortgage balance if you die | Pays a fixed amount to your chosen beneficiary. |
| Coverage Amount | Declines as your mortgage balance decreases. | Stays the same for the duration of the policy. |
| Beneficiary | The mortgage lender. | You choose (e.g. spouse, partner, child). |
| Portability | Usually not portable if you switch lenders. | Fully portable — not tied to your mortgage. |
| Flexibility | Only covers the mortgage. | Can be used for any purpose: mortgage, childcare, education, etc. |
| Underwriting | Often happens after you make a claim, which can delay or reduce the payout. | Happens before the policy is issued, so coverage is guaranteed once approved. |
The Role of Home Insurance
Your mortgage lender will require you to have home insurance in place before your purchase closes, but choosing the right policy goes beyond meeting that requirement.
Here’s what to consider:
- Dwelling coverage: Protects the structure of your home.
- Contents coverage: Covers your personal belongings — furniture, electronics, clothing, etc.
- Liability coverage: Protects you if someone is injured on your property or if you cause damage to a neighbour’s property.
- Additional living expenses: Covers temporary housing if your home becomes uninhabitable due to a covered loss.
If you’re buying a condo, you’ll need condo insurance to protect your unit, contents and liability as the condominium corporation’s insurance policy only covers common areas and the structure itself.
Building Long-Term Financial Health
Owning a home is a long game. These simple steps can help you protect your investment and your peace of mind:
- Build an emergency fund: Try to set aside 3 – 6 months worth of expenses for unexpected repairs or job loss.
- Keep up with maintenance: Regular upkeep helps prevent costly surprises, and some damage may not be covered by insurance if it’s due to neglect.
- Review your insurance yearly: As your home or lifestyle changes, your insurance should evolve too.
- Plan for the future: If you’re starting a family or have people who depend on your income, life insurance is a smart way to add stability.
Talk to an Expert
Your home is likely your biggest asset, and it deserves the right protection. A licensed insurance broker can help you navigate your options, explain what’s covered (and what’s not) and recommend solutions that fit your life and budget.
Our team is here to help. Contact us today to learn more about life insurance.