What is Mortgage Insurance?
Mortgage life insurance is designed to help cover your mortgage balance if you die and, in some cases, if you become critically ill or disabled, depending on the policy.
In Canada, mortgage debt is often a household’s largest financial obligation. For many families, the question is simple: if something happened to you, could the mortgage still be paid without forcing the sale of the home?
Most Canadians encounter mortgage insurance in one of two ways:
- Coverage offered through a bank or lender at the time of the mortgage
- Personal life insurance structured specifically to protect the mortgage
While both aim to address the same risk, they are not the same. Differences in underwriting, ownership, payout structure, and flexibility can significantly affect how protection works at claim time. Understanding those differences is essential before choosing one.
Mortgage Insurance Through a Bank vs Personal Life Insurance Key differences homeowners should understand
| Feature | Bank Mortgage Insurance | Personal Life Insurance |
|---|---|---|
| Policy ownership | Controlled by the lender | You own the policy |
| Payout recipient | Paid directly to the lender | Paid to your chosen beneficiary |
| Coverage over time | Declines as the mortgage is paid down | Level coverage you choose |
| Coverage duration | Often ends at age 65 or 70 | Can be structured to last for life |
| Underwriting timing | May occur at claim time | Typically assessed at application |
| Cost efficiency | Often higher for coverage provided | Often lower cost for the same coverage |
| Convertibility | Typically not convertible to permanent insurance | Often convertible to permanent coverage |
| Portability | Tied to a specific mortgage | Not tied to a lender |
| Flexibility | Limited options | Greater flexibility and control |
| Use of funds | Pays the lender only | Funds can be used as needed |
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Do you need peace of mind with mortgage insurance?
Speak to one of our mortgage insurance specialists to see if it should be part of your financial plan. Call us directly at: 1-877-654-6119 or click below to get started!