See who the benefit really protects, how creditor coverage shrinks with your loan, and why post-claim underwriting matters.
Creditor/mortgage DI
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Monthly benefit = your mortgage payment. Paid to the lender.
Traditional DI
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~60% of income, tax-free. Paid to you.
Balance protected
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What creditor DI is covering at that year.
Income creditor DI ignores
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Monthly income above the mortgage payment that only traditional DI replaces.
Creditor/mortgage DI claim
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Traditional DI claim
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How this works. With creditor/mortgage DI the lender is the policyholder and beneficiary
(Table 2.1): if you become disabled it pays your scheduled mortgage payment straight to the bank, and the coverage
ends the moment the loan is repaid. With traditional individual DI you are the policyholder and beneficiary:
it replaces roughly 60% of your income tax-free, keeps paying past your mortgage, and can be used for anything. Creditor plans
have limited underwriting up front, so they underwrite at claim time ("post-claim underwriting") and
typically use a strict any-occupation/total-disability definition; a pre-existing condition can sink the claim. A fully
underwritten individual policy settles your health at application, before you ever need it.
Educational illustration of standard Canadian insurance concepts. Figures are illustrative, not an insurer’s rates.
Illustration only, not a quote or advice. Figures are simplified for education and do not
reflect any specific insurer's rates. Consult a licensed advisor.