If you are putting less than 20% down you will require this default insurance. The insurance has predetermined fees based upon the amount (percentage) of funds you are using for a down payment. The fees are built into your mortgage and not required as an out of pocket expense.
The default insurance protects the bank should one default on their mortgage obligation. The default insurance company will pay the bank and pursue the client.
We have three insurance companies in Canada. Cmhc, Genworth and Canadian Guarantee. This insurance is for properties no greater than 1 million dollars. Rental properties and investment properties are now
no longer able to utilize cmch. Previously they had access.
Blanket coverage is often used by lenders. They will extend their specific products to you and based upon the percentage you put down, greater than 20%, they will allow you access to these products. The lender will enroll you under the umbrella at no cost to you. This can open opportunities to you to enjoy the lower rates that are generally advertised and made available to mortgages with default insurance.