What type of mortgage includes insurance that covers payments in the case of the borrower's death or disability?

The correct choice is the type of mortgage that includes insurance to cover payments in the event of the borrower's death or disability. This type of insurance, known as creditor insurance or mortgage life insurance, is designed to pay off the remaining mortgage balance or cover monthly payments if the borrower can no longer fulfill their obligations due to specific circumstances like death or disability.

Creditors typically offer this insurance as an added protection for lenders, ensuring that the mortgage remains secured and payments are maintained even in unforeseen situations affecting the borrower's ability to pay. This is particularly important for individuals who may have family members dependent on them or for those who want to ensure their mortgage does not become a burden on their loved ones in case of their demise.

In contrast, conventional mortgages do not inherently include such insurance—borrowers can choose to obtain it separately, but it is not included by default. High-ratio mortgages generally relate to the down payment size relative to the property value and do not automatically come with creditor insurance either. Equity mortgages focus on the value of the property and do not include provisions for insurance related to death or disability of the borrower. Thus, the distinguishing feature of creditor insurance in this context makes the first choice the most appropriate answer.