This is an extra cost borne by the borrower and used to protect the mortgage company against losses should the borrower fall into arrears requiring the mortgaged property to be sold. The premium payable on mortgage indemnity insurance is a one-time payment.

Mortgage indemnity insurance covers a percentage of the loan, it is designed to protect the mortgage company and not the property buyer. If the client defaults on the loan and the property is repossessed and sold, the insurance will "kick in" to pay a percentage of the principal.

If your home is repossessed and sold for less than the outstanding debt, the lender could still pursue you for the losses.

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