From the Financial Consumer Agency of Canada (FCAC), more than one-third (35.5%) of Canadians hold a mortgage. Taking a mortgage can help many people afford to buy a home, whether that’s their first or not.

Home insurance is one of the many expenses that come with home ownership. Home insurance ensures that, in the event of an unexpected disaster, break-in, or similar event, your assets are protected. Unfortunately, too few homeowners understand the ways in which many insurance carriers will look at their mortgaging habits; fewer still may know that having multiple mortgages can impact your insurance pricing.

Mortgaging and Home Insurance

Most lenders, banks, and financial institutions require home insurance before agreeing to mortgage your new asset.

On their end, this protects their investment in your home. A mortgage lender has a vested interest in ensuring that, in the event of a catastrophic loss, they aren’t losing out. Mortgages don’t disappear even if a house is destroyed, and so having home insurance protects them and you from monetary loss or even financial hardship.

In the event of a lawsuit, home insurance also provides protection. This protects both the lender and the homeowner. If the homeowner were sued for damages, their policy could pay the difference – all while ensuring they were still in a good financial position to continue paying off their loan. This isn’t the main concern for most lenders, but it does add another layer of financial security.

Different providers, different risk

Many insurance carriers will incentivize homeowners to pay off their mortgages through mortgage-free discounts. The logic here assumes that the homeowner is more financially responsible because they’ve paid off their mortgage already.

Not all insurance providers offer a mortgage-free discount. If you are mortgage-free, it’s worth discussing with your insurance broker to get the best deal possible on your home insurance premiums.

Properties with Multiple Mortgages

Like how some providers will offer mortgage-free discounts, many will price home insurance higher when a property has multiple mortgages. This is because these insurers will associate the multiple mortgages (2 or more) as increased financial risk and potentially complicated liability. Multiple mortgages may indicate higher financial strain on the homeowner, potential for higher risk property use, and a default risk.

Some insurance carriers, like Max Insurance, don’t charge additional premium whether you have one mortgage, two, etc. Multiple mortgages isn’t a reflection of the likelihood of a fire, water damage, or theft, and it doesn’t take into account the quality of the building materials. Multiple mortgages may be viewed as more of a financial detail and less of a property risk. Different providers have various interpretations of risk.

Bottom Line: Your Home’s Mortgaging Situation May Impact Your Home Insurance – But it Depends on the Insurer

In a nutshell, your home’s mortgaging situation (whether that’s having multiple mortgages, no mortgage, or one) may impact your pricing, but it also depends on the insurer that you’re with.

Working with an insurance broker opens up your options to find the insurance provider who offers the best coverage and best pricing for your needs. They’ll find a carrier whose rating system works best for your needs, while also getting you the protection that you deserve.