Does a Reverse Mortgage Affect Your Home Insurance Costs in Ontario?

When you take out a reverse mortgage, your home insurance doesn't disappear—but requirements may change. Most borrowers find their insurance costs stay similar, though policy adjustments are often necessary. Let's explore how reverse mortgages affect your home insurance in Ontario.

This article is for educational purposes only and does not constitute financial advice.

Your Insurance Obligation: It Stays the Same

One key point to clarify immediately: you remain responsible for insuring your home. A reverse mortgage doesn't change this legal obligation. The lender doesn't add insurance charges to your loan—you maintain the policy directly with your insurance provider.

What the Lender Requires

When you close a reverse mortgage in Ontario, your lender (CHIP, Equitable Bank, Bloom Financial, or Home Trust) requires proof of adequate home insurance. This typically means:

• Minimum coverage amount — usually equal to the reverse mortgage balance or the replacement value of your home (whichever is greater)
• Named insured — you remain the named insured; the lender is noted as "mortgagee" (loss payee)
• Proof of coverage — policy documents provided before or at closing
• Continuous coverage — the policy must be maintained throughout the life of the loan

Unlike traditional mortgages, the lender doesn't automatically pay your insurance premiums. You do—just as you do now.

Will Your Insurance Rates Increase?

Short answer: Probably not because of the reverse mortgage itself. Insurance companies don't consider having a reverse mortgage when calculating your premiums. However, changes to your coverage amount may affect your rate.

When Rates Might Increase

Scenario	Impact on Rate
You increase coverage amount	Likely increase (higher coverage = higher premium)
Your home ages or repairs are deferred	Possible increase (age/condition factors)
You add riders or endorsements	Increase (added coverage costs more)
Claims history changes	Possible increase (new claims filed)
Renewal with different insurer	Variable (shop for best rate)
Provincial insurance market conditions	Possible increase (industry-wide changes)

When Rates Typically Stay Stable

• The reverse mortgage is not a claim-triggering event
• Your home condition and location remain unchanged
• You maintain good claims history
• You stay with the same insurer

Pro tip: Many Ontario homeowners don't shop for insurance at renewal. If your rates increase at renewal, compare quotes from other insurers. A reverse mortgage doesn't lock you into your current provider.

Coverage Adjustments You May Need

Taking out a reverse mortgage may mean updating your insurance coverage. Here are common adjustments:

1. Increase in Coverage Limit

If your current policy covers $300,000 but your reverse mortgage is $200,000, your lender may require you to increase coverage. Some lenders want coverage at the replacement value of your home, not just the loan amount.

Example:

• Current coverage: $300,000
• Reverse mortgage amount: $200,000
• Home replacement cost (per appraisal): $450,000
• Your lender may require: Coverage of at least $450,000

Increasing coverage typically raises your annual premium modestly—often $100–$300 per year depending on your home and location.

2. Mortgagee Clause Update

Your insurance policy must list the lender as "mortgagee" (loss payee). This protects the lender if there's a claim. If you had a previous mortgage, your insurer already has mortgagee language—it just needs to be updated to name your new reverse mortgage lender.

Process:

1. Notify your insurer of the reverse mortgage before closing
2. Provide lender's name and address
3. Insurer amends the policy (usually at no charge)
4. Updated policy provided to your reverse mortgage lender

This is a simple admin change with no cost impact.

3. Tenant or Renter Endorsement

If you're renting part of your home or have a caregiver living with you:

• Notify your insurer
• Ensure your policy covers your liability for tenants
• Some insurers require specific endorsements
• Costs vary but typically modest

4. Condo or Townhouse Insurance (Special Case)

If you own a condo or townhouse:

• The condo corporation carries building insurance (roof, structure)
• You must carry condo unit insurance (contents, upgrades, liability)
• Reverse mortgage lender requires proof of both
• No additional cost for reverse mortgage—just standard requirements

Cost Comparison: Reverse Mortgage vs Keeping Insurance Current Alone

Let's compare typical annual costs for a $400,000 Ontario home:

Coverage Scenario	Annual Premium	Notes
Standard homeowner's insurance (current)	$900–$1,200	No reverse mortgage
Same home + increased coverage for RM	$1,050–$1,400	Coverage increase cost: ~$150–$200/year
Difference	+$150–$200	One-time adjustment at mortgage closing

This is typically a modest increase and often less than the financial benefit of the reverse mortgage proceeds.

Maintaining Your Insurance: Key Responsibilities

Once your reverse mortgage closes, these responsibilities are yours:

✓ Pay premiums on time — the lender relies on coverage existing. Late payment risks lapse.

✓ Maintain continuous coverage — no gaps between renewals.

✓ Notify insurer of changes — renovations, increased occupancy, added structures, or business use.

✓ Review coverage annually — ensure it still matches your home's replacement cost.

✓ Provide proof of insurance — if the lender requests it (they may ask periodically).

✓ Update the mortgagee clause — if you later refinance the reverse mortgage to a different lender.

Common Questions About Insurance and Reverse Mortgages

Q: Can the lender cancel my insurance if I don't pay? A: No. You hold the policy, and you pay the insurer directly. The lender cannot cancel your insurance. However, if your insurance lapses (non-payment), the lender may purchase forced insurance on your behalf and charge the cost to your reverse mortgage balance.

Q: Do I need title insurance with a reverse mortgage? A: Yes. Most lenders require title insurance to protect against ownership disputes or liens. This is a one-time cost (typically $300–$600) paid at closing, not an annual renewal.

Q: Will the insurance company refuse to insure a home with a reverse mortgage? A: No. Insurers don't deny coverage based on a reverse mortgage. They may require you to increase coverage limits, but that's standard, not discriminatory.

Q: What if my home is damaged or destroyed? A: If your home is damaged or destroyed, the insurance proceeds are used to repair or rebuild. If proceeds exceed the reverse mortgage balance, you keep the excess. If they fall short, the no-negative-equity guarantee protects you—you don't owe the difference.

Q: Do I need separate insurance for a secondary suite or rental unit in my home? A: Possibly. Check with your insurer. Some policies cover rental income; others require endorsements. Notify your insurer and reverse mortgage lender of any rental unit.

Tips for Managing Insurance Costs with a Reverse Mortgage

1. Shop at renewal — don't auto-renew. Get 3–5 quotes annually. A reverse mortgage doesn't lock you into your current provider.

2. Bundle policies — if you have auto or life insurance, bundling with your home insurer often yields discounts (5–15%).

3. Increase deductibles — if you have emergency reserves (often the case with reverse mortgage proceeds), raising your deductible from $500 to $1,000 can save 10–15% on premiums.

4. Ask about senior discounts — many Ontario insurers offer age-based discounts for homeowners 55+. Ask explicitly.

5. Maintain good home condition — insurers offer discounts for well-maintained homes, updated electrical systems, security systems, and fire suppression systems (sprinklers). These can save 5–20% annually.

6. Ask about loyalty discounts — if you've been claims-free with your insurer for years, ask about renewal discounts.

---

This content is for illustrative purposes only. Rates may vary. Call Rick Sekhon for the best rates and more information.

---

Speak to a licensed mortgage professional. Independent legal advice is required before closing a reverse mortgage in Ontario.