Mortgage Life Insurance Intro

Welcome to your mortgage insurance guide. This page will give you a good understanding of mortgage insurance and will inform you of savings opportunities, as well as provide a number of other useful tips based on our publications.

When you buy a property, you are typically offered mortgage insurance with it. Put in a simple way, mortgage insurance is an insurance that pays for your mortgage if you cannot do it due to death, disability, or critical illness. You can think about it as a purpose-linked insurance that only covers your outstanding mortgage debt to the bank. Mortgage insurance is considered by many financial experts to be a “junk insurance” due to a number of reasons which we have listed below. It is very easy to get mortgage insurance, but in most cases getting life insurance instead is a much better option.

Why mortgage insurance is not a good idea? Get life insurance instead.

  1. Bank as beneficiary: If you get mortgage insurance, the beneficiary will be the bank as opposed to your family, whereas life insurance allows family to be the beneficiary;
  2. Post-underwriting product: Mortgage insurance is a post-underwriting product, as opposed to life insurance which is underwritten prior to being put in force. Post-underwriting basically means that your insurer will only check if you were telling the truth on your application (typically very vaguely formulated) in the case of a claim, and keeps the right to decline your coverage. In the case of life insurance, once you are approved for insurance, you are protected.
  3. Insurance cap: Mortgage insurance can have a cap (e.g. $500,000) that might not be enough to cover the mortgage. Life insurance coverage can be significantly higher.
  4. Length of coverage: Life Insurance always stays with you, whereas mortgage insurance can be cancelled if you change property/bank.
  5. Rates: Mortgage insurance is often more expensive than term life insurance for the identical coverage.

Overall, if you decide to go for mortgage insurance, you are getting a limited coverage with numerous constraints and uncertainty. Should you decide to go for a life insurance, the protection is more solid, coverage is higher and can be used for multiple purposes e.g. pay off mortgage, outstanding loans, substitute income, etc. Here is an approximate size of premiums that you should consider if you get a term life insurance (please note that the premiums can vary and depend on numerous factors such as age, medical history, current health condition etc).

Mortgage Life Insurance: Expert Opinion

Our expert: Lorne Marr from LSM Insurance
(Want to connect with Lorne? You can do it here)

“Mortgage life insurance is often a very misunderstood term. It essentially is just life insurance to cover your mortgage balance. It is heavily promoted by the banks or lending institutions; it is generally a very high profit product for them. It’s often sold as an add-on to your mortgage. The people going in to discuss a mortgage usually aren’t thinking about mortgage insurance, so they often will sign up for the plan without really analyzing their insurance needs.

An insurance broker can tailor a plan to fit your mortgage in with your other insurance needs and design a plan that is best for your situation. You can keep the plan if you sell your home, if you move to another bank; you can keep it even if you take out a term plan at first and convert it to a permanent plan down the road.

There are many more options with an individual life insurance policy than a mortgage life insurance policy that you get from a lender.

Cancelling Life Insurance: Expert Opinion

Our expert: Lorne Marr from LSM Insurance
(Want to connect with Lorne? You can do it here)

If you have a mortgage life insurance policy now – as much as individual life insurance is generally a better deal – you want to be very careful when cancelling any life insurance policy; not to cancel the coverage until you are approved for the new plan.

If someone had a life insurance policy with CIBC, and they weren’t happy with their premium, you don’t want to cancel that policy until you are approved for your individual plan; because if you are not approved, you could be left without coverage.
Life insurance policy that you get from a lender.

What are mortgage life insurance rates in Canada?

This chart illustrates the average term life insurance premiums across Canada based on all the records we have in our database.

How can you save on life insurance?

  • Got Life, Disability and Critical Illness? Cancel Mortgage insurance: Mortgage insurance is a fascinating product created by money lenders. Simply said, it is a different name of Life, Disability and Critical Illness insurance policy associated with payments for your mortgage.  Got a mortgage of $500k together with mortgage insurance for that? Well, if you have a Life policy large enough, you can save yourself mortgage insurance.
  • Annual vs. monthly payments: In comparison to monthly payments, annual payments save insurers administrative costs (e.g. sending bills) and therefore they may reward you with lower premiums.
  • Meet multi-life discount: If you get two separate Life insurance policies for both spouses from the same provider, one of the policies can have a significant discount, depending on an insurance provider
  • Dream job can mean higher life insurance premiums: Not being involved into dangerous jobs like a member of the police bomb squad will help to avoid additional insurance premiums.
  • Say no to guaranteed issue life policy: People with good health do not need a guaranteed issue life insurance policy (these are policies that do not require a medical exam but they cost more) – do a health check / exam and enjoy lower life insurance premiums.
  • Driving safe, save on life insurance: Ensure you have a good driving record before applying – a bad driving record is punished by life insurance provider (as by auto insurers) – your premiums will go up by extra 25-50%.
  • Other tips: Contacting an experienced, licensed broker (see a button below) will help you to find other ways to reduce insurance premiums of your life insurance premiums. Discussion with broker is entirely free and there is absolutely no obligations to buy.


Our Publications related to Life Insurance

Life, Disability and Critical Illness Insurance: Do Men or Women Pay More?

Life, Disability and Critical Illness Insurance: Do Men or Women Pay More?

Introduction There were many articles written about men paying more for car insurance than women, but what about other insurance types? Do women always benefit from lower insurance rates? We took on this question and systematically went through various life insurance, disability insurance, and critical illness insurance by consulting with professionals who had the answers. […]

Introducing a New Tool to Find Out What Issues 
Face with Their Insurers

Introducing a New Tool to Find Out What Issues Face with Their Insurers

The arrival of COVID-19 has pushed Canadians, more than ever before, online for finding and applying for insurance and banking products. It is not easy, though, to make the right choice without knowing if a particular insurer will be there when you need them the most. As the largest review platform with thousands of […]

If Life Insurance Plans Were Cars: How to Look at Various Types of Life Insurance in Canada

If Life Insurance Plans Were Cars: How to Look at Various Types of Life Insurance in Canada

Overall, insurance is considered a somewhat boring, though necessary, topic. On top of that, it is not always clear – there are plenty of various types of life insurance products in Canada that work differently. I decided to explain it in a bit of a different and funny way – I hope that you will […]

Insurance Companies in Canada – Easily Explained

Insurance Companies in Canada – Easily Explained

The life insurance landscape in Canada is quite unique. The infographic below shows all the key players and their size, reflecting their assets under management (AUM) based on life and wealth segments of the company’s business. scroll further down to continue reading In Canada, the majority of insurers fall under the umbrellas of three large […]

What is Travel Insurance, and Why Do I Need it?

What is Travel Insurance, and Why Do I Need it?

By When it comes to budgeting for your vacations, travel insurance is one of those things that’s often overlooked. It’s easy to understand why: we have publicly funded healthcare in Canada, so many people assume that benefit applies to wherever we travel in the world. Unfortunately, that’s not the case. The cost of seeking […]