Mortgage Protection

Mortgage protection insurance is coverage that pays off, or helps pay down, your mortgage if you die while the loan is still outstanding, so your family can keep the home without the monthly payments. It comes in two forms: the mortgage insurance a bank or lender sells you when you sign your mortgage, or your own term life policy sized to cover the balance. Both protect against the same event, but they work quite differently, and that difference matters when choosing between them. Read the full guide →

No. Mortgage life insurance is not mandatory, and your lender cannot require you to buy it to approve your mortgage. It is an optional product that needs your express consent to take on. It should not be confused with mortgage default insurance, often called CMHC insurance, which is a separate product required when your down payment is under 20 percent and which protects the lender, not you.

Mortgage life insurance and mortgage default insurance sound alike but do opposite jobs. Mortgage life insurance protects your loved ones, clearing the mortgage if you pass away so your family can stay in the home. Mortgage default insurance, offered by CMHC, Sagen, or Canada Guaranty, protects the lender if you stop making payments and default, and it is required when you put down less than 20 percent. One is for your family, the other is for the bank, and only the default insurance is ever mandatory.

The bank's mortgage insurance names the lender as the beneficiary, not your family. If you pass away, the money goes straight to clearing the mortgage balance, with nothing left over for your household. A personal term life policy lets you name your own beneficiary, usually your spouse or family, who then receive a tax-free lump sum to use however they see fit, whether toward the mortgage, income, or childcare.

No. The bank's mortgage insurance is a group creditor policy tied to your loan, the payout can only go toward the mortgage, and it shrinks as you pay the loan down. A personal life insurance policy is owned by you, the coverage amount you choose stays fixed, and your family decides how to use the money. Both aim to protect the home, but they differ significantly in ownership and flexibility. Read the full guide →

For most people, a personal term life policy is the better choice. The bank's coverage shrinks as your balance drops while the premium stays the same, the payout goes to the lender, and it usually is not portable if you switch lenders. Term life keeps the coverage amount you chose, pays your family, follows you from lender to lender, and is often cheaper for the same protection. The bank's version wins mainly on convenience at the signing table.

Yes. With most lender mortgage insurance, the benefit follows your outstanding balance down as you pay off the loan, so the coverage shrinks year after year. The premium, however, usually stays the same the whole time, which means you can end up paying a flat price for a benefit that keeps getting smaller. A term life policy keeps the full amount you picked for the whole term, even as your mortgage balance falls.

Post-claim underwriting means the insurer assesses your health only after you die and a claim is filed, rather than when you sign up. Much bank mortgage insurance involves little or no health review at signup, so it feels quick and easy, but if the insurer later finds anything on your application that does not line up, the claim can be denied at the worst possible moment. With personal life insurance, the health review happens up front, so once you are approved, your family knows the coverage will pay.

No, the bank's mortgage insurance is usually not portable. It is tied to that specific loan with that specific lender, so if you switch lenders or move your mortgage, the coverage typically ends and you have to reapply, often at a higher price because you are older. A personal term life policy is not tied to your lender, so it stays with you no matter where the mortgage sits or who holds it. That portability is one reason many people prefer owning their own coverage.

Only if you own the coverage yourself. With the bank's mortgage insurance, the lender is the beneficiary and the money can only clear the loan. With your own life insurance, you choose the beneficiary, whether your spouse, your children, or anyone else, and they receive a tax-free lump sum to spend as the family needs. That control is a large part of why a personal policy tends to serve families better.

Mortgage protection insurance costs depend on your age, health, whether you smoke, and the coverage amount, so the price varies. As a rough guide, a healthy non-smoker in their mid-twenties might pay 20 to 30 dollars a month for a large 20-year term policy, while someone in their mid-forties might pay closer to 50 to 75 dollars, with rates climbing steeply with age. Personal term life is often cheaper than the bank's mortgage insurance for the same protection, and the only way to see your real number is to run a quote.

Most major Canadian life insurers offer a personal term life policy that can protect your mortgage, including Canada Life, Manulife, RBC Insurance, Empire Life, iA, Desjardins, Equitable, and BMO Insurance. The bank's own mortgage insurance is sold separately by your lender at the signing table. Because rates for the same coverage vary a lot between companies, comparing them is worthwhile, and that is exactly what a broker helps you do at no cost. Read the full guide →

A sensible starting point is your outstanding mortgage balance, so your family could clear the loan and stay in the home. Many people go further and add coverage for other debts, income replacement, or their children, since a term life policy can cover all of that at once rather than the mortgage alone. Matching the term length to your amortization, for example a 25-year mortgage with a 25 or 30-year term, keeps you covered for the life of the loan, and an advisor can help you land on the right number.

With the bank's mortgage insurance, you generally pay for as long as you hold that mortgage with that lender, and the coverage ends when the mortgage is paid off. With your own term life policy, you choose the term up front, commonly 10, 20, or 30 years, and keep it for that whole period regardless of your lender. Matching the term to your amortization means you are covered until the mortgage would be paid off anyway.

Usually not. If your existing life insurance is large enough to clear the mortgage and lasts long enough to cover the loan, it is already doing the job, and buying the bank's mortgage insurance on top often means paying twice for the same protection. It is worth a quick check that your coverage amount and term line up with your current mortgage. If there is a gap, topping up your own policy usually beats adding lender coverage. Read the full guide →

Two different products get mixed up here. With under 20 percent down you will need mortgage default insurance, the CMHC-style coverage, which is required and protects the lender, not you. Mortgage life insurance, the kind that protects your family, is entirely optional, and you do not have to buy the version your lender offers at closing. Many first-time buyers decline the bank's coverage and get their own term life policy instead, which is usually cheaper and better. Read the full guide →

It depends on which type you have. The bank's mortgage insurance is tied to the loan, so refinancing with a new lender usually means the old coverage drops and you reapply from scratch, often at a higher rate, though refinancing with your current lender can sometimes let you keep it. A personal term life policy continues unchanged, since it does not end because you moved, refinanced, or switched lenders. That is one more reason owning your own coverage is simpler.

Occasionally, yes. If you have health conditions that make qualifying for personal life insurance difficult or expensive, the bank's coverage can be easier to get since it often asks few or no health questions up front. It is also convenient, since it is offered right when you sign the mortgage. For most healthy buyers, though, a personal policy is cheaper, keeps its value, pays your family, and follows you between lenders, so it is worth getting a quote before you decide.