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    Mortgage Insurance: Expert explains

    “Mortgage Insurance is a life insurance policy to cover your mortgage. Now, you can get mortgage insurance generally through a lending institution or through the individual life insurance policy from a life insurance provider. Mortgage Insurance through a lending institution will be tied to your mortgage, so it goes down as your mortgage goes down. That’s also not portable – if you switch lenders or if you move to another home, you’d have to re-apply for mortgage insurance whereas individual life insurance – you can tie it in with your other insurance needs and it will pay off your mortgage and provide some level death benefit. You choose you own beneficiary so you can have your spouse, your child, your family members as beneficiary. And, if you are $500,000 in coverage, and your mortgage is $300,000, the beneficiary will have $300,000 to cover the mortgage plus $200,000 to cover the other costs. So, you have a lot more flexibility there and are choosing your own beneficiary and the coverage amount. It’s also portable, if you move to another home or go to another bank, you know, take on an additional line of credit – it gives you a lot more flexibility in terms of how you set up that coverage.”

    Mortgage Insurance: Background

    You have just spent months shopping for your dream home, then weeks looking for the best mortgage rate. Your lender suggests taking out mortgage insurance to protect your prized asset. On the surface it sounds like a good idea – protecting your loved ones against an unforeseen illness or death seems like a prudent decision, so at the lender’s suggestion you decide to tack on the premium to your mortgage payment.

    This scenario unfolds hundreds of times each week throughout Canada, yet many consumers still do not realize that they may be getting ripped off. The basic premise behind mortgage insurance is sound; the problem is that, in most cases, consumers blindly sign up without taking the time to examine their options. Mortgage insurance offered through a lender just does not offer the flexibility available with individual insurance policies offered through life insurance companies, and in most instances the coverage is significantly more expensive through a lender.

    Mortgage Insurance: Important to Know

    Let’s take a closer look at a few mortgage insurance specifics:

    1. The mortgage insurance coverage amount with a lender declines as your mortgage balance declines. The coverage amount on a separate policy remains the same, even as your mortgage shrinks.
    2. Mortgage insurance through a lender is not portable. An individual mortgage insurance policy through an insurance company is owned by you – you can keep it if you switch banks, pay off your mortgage or move to a new home.
    3. Mortgage insurance through a lender only pays out a benefit equal to the mortgage, even if both spouses die. Individual policies will pay out twice the amount in the event of a simultaneous death.
    4. A mortgage lender’s insurance names the bank as beneficiary if you die. A separate policy allows you to choose your own beneficiary.
    5. Mortgage insurance through a lender is not convertible to a permanent insurance policy. An individual term policy through an insurance company is convertible without a medical to a permanent policy – providing lifetime protection and the ability to generate a tax-sheltered cash value.

    Benefits of individual life insurance coverage versus mortgage life insurance

    Individual life insurance can be tailored to the amount of your mortgage, or the insured can combine their life insurance needs with their debt protection needs. Individual life insurance for a mortgage, can either be Term or Permanent insurance. Term insurance policies are fixed for a stated term, such as a 10, 20, or 30-year term. Whereas, a Permanent policy can provide level premiums for the insured’s lifetime. Permanent policies can also build a cash value and can be paid up in a limited number of years.

    Here are several additional benefits of individual life insurance versus mortgage life insurance:

    1. The coverage is portable – if you move homes or switch to another bank.
    2. The insured chooses the beneficiary, rather than the bank.
    3. The individual plan pays out double in the event both spouses die.
    4. One can combine Term and Permanent insurance needs under one plan.
    5. Coverage can be maintained even after your mortgage is paid-off.
    Interested in Mortgage Insurance or have questions?

    Using Life Insurance to protect your mortgage

    Instead of going for expensive mortgage insurance, it is much wiser to get a life insurance policy to cover your mortgage.

    An overview below shows key differences between Mortgage Life Insurance and Individual Life Insurance

    mortgage life vs individual life
    Interested in Mortgage Insurance or have questions?

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    • Jessie
      August 4, 2016 at 3:43 pm

      I purchase a house 3 yrs ago but for health reasons I was turn down. If I die what happens to my home do the bank take the house and sell or are my children who would be my benefitiers responsible. I have 2 term life insurance for 100,000.00 can the bank take this for the mortgage. I don’t have a will done yet but in the process of getting one done. For this term insurance I pay close to 400. Mth because of health issues I had bladder cancer but have been cancer free for 4 yrs I also have high blood pressure which I have had since I was in my thirties and has been controlled. My question is can I get a insurance for the mortgage or is it best for me to sell the house. I dnot want the bank to be able to take the life insurance that I have for my children is there something else that I can do.

      • LSM Insurance
        August 9, 2016 at 9:49 am

        Thanks for the inquiry there’s a lot of variables involved and will be in touch by email

    • Gloria & Norm
      April 14, 2015 at 10:13 pm

      Hi there::

      Is there any company who can provide mortgage life/disability insurance for people over 65? Thanks.

      • LSM Insurance
        April 15, 2015 at 12:20 pm

        Thanks for the note. You have quite a few options on the Life Insurance side and some on the disability insurance. We’ll be in touch soon.

    • Andy Suboch
      November 18, 2014 at 7:13 pm

      Without looking at the mortgage documents it is impossible, in my opinion to advise as to whether you may or may not have a cause of action as against Scotiabank or any other party based on what is set out below. In many mortgage insurance policies, there is a requirement that the mortgage be in good standing and all payments be made at time of death. It seems that might not be the case below. However, a Court might be able to grant relief against forfeiture if it were just to do so. I would need to more thoroughly review all documents and meet with you before I could give you a professional opinion.

      In general there are 2 year limitation periods that might apply. If you did have a cause of action, and you did not commence legal action within 2 years of knowing or when you ought to have known that you had a cause of action, your claims, if any might be statue barred.

      I confirm until I have been retained by way of written retainer, I will not take any measures to protect any of your interests.

      If you would like a free consultation, please call Eliza at 416-815-1331 x221 to arrange for same.


      Andrew Suboch

    • Art
      November 18, 2014 at 7:11 pm

      My husband and I took out a mortgage with …. six years ago. The mortgage went into default in 2012 but we were still making full payments on the loan during the months it wasn’t every month but we would still make payments. He became ill in 2012 and he passed away in
      2013 from he pass away from heart attack. I notify the bank that he pass away they ask me to bring in the death certificate and they gave me a claim form to take to the hospital. I ask them if they were paying off the balance of my loan which was 150,000. they said no. The mortgage was defaulted and the insurance wasn’t paid. I said to him that they were still receiving payments from me up until 2012 of December. My mortgage had indemnity, credit protection and level life insurance. I showed the guy my contract where it was included in my mortgage. He says we have no insurance coverage there. He said only the home has insurance. They paid the home insurance and not paid our life insurance. How is that? I need some answers here please.

    • Maria Teresa Fernandez de Castro
      July 24, 2014 at 12:24 am

      I did not know about this and feel into the trap bing coerced into a mortgage that had the condition of getting mortgage insurance with their bank. I have now asked to cancel with them and hire another company and they are saying I can’t

      Do you know what are my options?

      • LSM Insurance
        July 24, 2014 at 9:30 am

        This should not be a condition of the mortgage. But it is important not to confuse this with mortgage default insurance.

    • James
      March 30, 2014 at 6:15 pm

      What are my options if the bank denied me for mortgage insurance. I still need the coverage and I would prefer a plan without a wiating period

      • LSM Insurance
        March 30, 2014 at 6:33 pm

        You could request that bank informs you or your doctor in writing why you were declined. There is a chance you could still qualify for a traditional life insurance policy. Mortgage insurance plans do not offer sub standard rates. Life Insurance policies do and as such you could qualify for a rated policy – a policy which is issued on an immediate pay basis but has an extra premium for the extra health or lifestyle risk. You could also submit a preliminary inquiry which is not a formal application but would give you an idea which companies might approve you.

    • rick
      February 11, 2014 at 1:40 am

      hi…..excuse my ignorance re these financial aspects but could you pls provide some info to the following:

      scenario: 63 year old single man wishes to purchase condo for 400k…….only significant debit is current mortgage on his home 128k……assets to 170k in mutuals with public service pension of 60k per annum ,,,,,,,,lifetime smoker but currently not smoking
      Q do you think i’ll qualify for a mortgage
      Q do you think i’ll qualify for mortgage insurance,,,,,,,should I get mortgage insurance or life insurance
      Q if I pass, do the benefactors |

      (my daughters), own the condo

      • LSM Insurance
        February 11, 2014 at 10:13 am

        Thanks for the note Rick. Regarding if you qualify for a mortgage. I would think so but this outside my area of expertise. A mortgage broker or lending institution should be able to assist further in this area.

        If you are in good health you should qualify for mortgage insurance. But life insurance to cover the mortgage generally provides a much better value. If you name a beneficiary they would receive the money if you pass away. We are happy to help further you can contact us at 1-866-899-4849. Regards.

    • LSM Insurance
      January 21, 2014 at 4:41 pm

      Louis there should not be in penalty to cancel your mortgage insurance. You would want to make sure your new coverage was approved first.

      As for the savings with out your date of birth, smoking status etc it’s hard to say. I will send you a separate email now.

      Jim Yih a went over some interesting points on the benefits of individual life insurance versus mortgage insurance

      **When you buy mortgage insurance through the banks, the policy is attached to a specific mortgage. If you move your mortgage to another company, you may have to re-qualify for new mortgage insurance coverage through the new financial institution.

      With a personal life insurance policy, you own the policy regardless of where the mortgage is taken out. If you wish to change the coverage, you have the flexibility to make changes.

      With mortgage insurance there is basically one policy for everyone. With personal life insurance, there is opportunity and flexibility to customize these policies to your personal needs**

    • Louis
      January 21, 2014 at 4:36 pm

      How can switch my mortgage insurance with TD and what are the penatlies how much do you think I’ll save

    • LSM Insurance
      January 3, 2014 at 4:30 pm

      Promod Sharma highlights some good points on the Pitfalls of Mortgage Life Insurance in his article

    • Brian So
      November 26, 2013 at 3:00 pm

      Great post!
      A few things I’d like to add: The insurer does not offer guaranteed rates for mortgage insurance, so your premiums may increase down the road. Also, since the policy is not owned by you, it can be cancelled with 30 days notice, leaving you without life insurance coverage.

      • LSM Insurance
        November 26, 2013 at 3:15 pm

        Good point on the policy being owned by the bank.

    • Rob
      November 8, 2013 at 9:23 am

      Can I get an immediate pay mortgage ins. plan no wait even if I was just declined. Personally I think my decline makes no sense. But am I automatically ruled out elsewhere. I don’t want to spin my wheels

      • LSM Insurance
        November 8, 2013 at 9:45 am

        Hi Rob,

        You can submit another application and depending on the circumstances you may qualify for a traditional life insurance plan – we could also submit a preliminary inquiry which is not a formal application. Simplified Issue Life Insurance – no medical tests and a short series of health questions may also be an option

    • Thomas
      August 16, 2013 at 7:27 pm

      How much is it for $440,00 Mortgage insurance me and my wife. My DOB is …. and my wife is ….. She had cancer 4 years back

      • LSM Insurance
        August 19, 2013 at 1:30 pm

        Hi Thomas, The premiums will depend on your smoking status and the type of plan. Your wife may be able to qualify for a traditional policy likely with a rating i.e. an extra premium depending on the type of cancer and treatment. We will be in touch by email

    • LSM Insurance
      June 12, 2013 at 5:18 pm

      Hi Kallee, You could look into a preliminary inquiry with a carrier who has not declined you or look into Simplified Issue Plans with Industrial Alliance, Canada Protection Plan or Assumption Life. The first two have Simplified Issue Term plans for $100,000 even if you were declined in the last 2 years. But there would be a two year waiting period for non accidental deaths.

    • Kallee
      June 12, 2013 at 5:12 pm

      Im looking for $200,000 Mortgage Coverage. The problem is I had a Heart attack 3 years ago and I was just declined. I’m 61, can u help.

    • Roland
      May 22, 2013 at 2:44 pm

      Hi There,

      How much is $300,000 Term ins. for a 40 year old. Non Insulin diabetic. No insurance now

      • LSM Insurance
        May 22, 2013 at 3:52 pm

        Thanks for the note Roland. The premiums will depend on the type of Term plan – Term 10, Term 20 etc and the stability level of your diabetes. We will send you a separate email now.

    • Syed Raza
      May 14, 2013 at 5:58 pm

      Hi Francis,

      Just a side note to the above comment, many carriers will only ask if you have been declined the past two years and some deferred death benefit plans will not ask if you have been declined at all.


    • Francis
      May 14, 2013 at 3:30 pm

      I have a bit of a long story. I was declined for life insurance last year because of my weight. I was about 150 pounds overweight at the time.

      I have since lost 75 pounds and my blood pressure is stable. I have heard if I get declined it stays on your record like a speeding ticket. What should I do Idon’t want to declined but I have a youbg family.

      • LSM Insurance
        May 14, 2013 at 3:55 pm

        Thanks for the note Francis. Congratulations on your weight loss. Most insurance will count any weight loss in the last year as half i.e if you lost 60 pounds in the last 12 months they will add back 30 pounds when underwriting your build. I know this does not seem entirely fair but that is how most carriers build a buffer in their underwriting. We could submit a preliminary inquiry to see if traditional coverage is available and if there would be a rating i.e. a surplus premium charge. Some Simplified Issue – no medical tests and a limited number of health questions do not have a build question.

        We will send you a separate email now.

    • LSM Insurance
      September 13, 2010 at 1:00 pm

      Thanks for the note – I’m glad you liked the report.

    • LuCynda
      September 13, 2010 at 12:43 pm

      Also – many benefits are not paid out as they do no medical exams or true medical questionaires prior to approving the individual for the mortgage insurance. It is after a claim is made the insurance company takes into consideration the health records of the individual. MANY claims are denied because the company will say the person had a pre-existing condition they did not report upon application. They will deny a person for having had medical tests they did not report on the application. Like mammograms, pap tests, blood pressure checks etc.

      The CBC report is great!

      And – mortgage insurance is NOT required. As a matter a fact, it is illegal for a mortgage company to tell a person they must have mortgage insurance in order to be approved for the mortgage – it is called tied selling.

    • LSM Insurance
      June 17, 2010 at 4:10 pm

      Thanks for the note!

    • Mitch Reynolds
      June 17, 2010 at 3:48 pm

      This is an excellent article on Mortgage Insurance. Why would anyone pay an inflated premium for a declining amount of insurance!! Get your own insurance policy for a level premium for 20 or 30 years, and you can take it from bank to bank as you renegotiate your mortgage, and you can even decrease your coverage as your mortgage declines, thus reducing your premiums.

      Bottom line – get qualified advice from an insurance professional, not the banker who is a loans officer.
      Mitch Reynolds

    • LSM Insurance
      June 15, 2010 at 8:36 am

      Thanks for the note. Premiums aside individual life insurance also offers the following benefits versus mortgage insurance through a lending institution:

      1. Level Coverage
      2. Coverage is Portable
      3. You choose your beneficiary
      4. The coverage can be integrated with your other life insurance needs

    • Malek
      June 14, 2010 at 8:19 pm

      Hello. I recently purchased a house and have signed my mortgage with BMO. Ofcourse the mortgage (life) insurance as mentioned is through an outside company, in this case Sun Life. They gave us a “deal” that if both my wife and I (age 29 both non smokers), that the premium ~41c per $1000 of average monthly loan balance, would be less than if we were to take it separately (27c). My payments havent started yet as I have not taken possession. Given that my wife already has whole life insurance (of equal value to the mortgage), is it worth it to keep the mortgage insurance, or get life insurance for myself instead. Keep in mind that premiums increase with age, however they are also based on average monthly loan balance (which I am guessing means that premiums should decrease as I continue to pay my insurance). I am on a variable rate and will be applying extra amounts to my mortgage yearly to reduce future payments.


    • LSM Insurance
      May 26, 2010 at 9:20 am

      Sonya, thanks for the note. We are happy to help – the premiums in part will based on the length of the Term you select. We will send you a separate email now.

    • sonya
      May 26, 2010 at 12:42 am

      We are currently paying a mortgage insurance but were told that term life insurance would be a better choice. I am 34yrs old, and my husband is 38. Both are non smokers and in generally good health. Would you please give us a quote on 250,000 (per person)term life insurance. Do we have a choice of paying higher monthly premium to cut short the number of years.
      Thank you.

    • LSM Insurance
      April 24, 2010 at 7:23 pm

      Thanks for the note. Some lenders may require life insurance on high ratio mortgages. Whether it is a requirement or not it is a good idea to factor your mortgage into your overall life insurance needs.

    • piyush
      April 24, 2010 at 12:29 pm

      hi, i would like to know that do i have to buy life insurance of mortgage insurance. i just bought house of 470000 so, pls. advise me.
      thanks ,

    • LSM Insurance
      March 28, 2010 at 6:55 pm

      Hi Angel,

      Thanks for the note. An individual life insurance policy almost always gives you a better value than the bank’s mortgage insurance plan. Having said that make sure your first approved for new coverage before cancelling your existing mortgage insurance.

      I would also suggest taking a more holistic approach to your life insurance needs. Your mortgage is likely just one component of your life insurance needs.

      The attached calculator can let you how much insurance you need – it takes into account immediate needs like mortgage protection and your income replacement needs and subtracts existing assets including any life insurance you already have.

      All the best!

    • ANGEL
      March 28, 2010 at 3:03 pm


      Can you help me regarding the best way to protect my home I bought Sept/1/09. Should I buy mortgage insurance from a different place then my bank where I originally mortgaged my house or should I buy a $250.000 term life insurance from some where different to cover the balance pay out apon my death. I only have $70.000 plus interest of 4.25 percent on pay out of my mortgage apon my death which is due on the first of the month, but my interest can change every 5 years. I have a 5 year renewable.

      Waiting for your reply
      Thank you

    • LSM Insurance
      February 28, 2010 at 4:21 pm

      Mortgage insurance is essentially life insurance and or disability/critical illness insurance to pay off the mortgage. Life insurance etc. can purchased from a separate from a life insurance company in lieu of mortgage insurance through a lending institution.

    • Isabel
      February 27, 2010 at 10:03 pm

      Hello. i am a person with a disability and recently purchased a house. I have critical insurance but I was told I will need mortgage insurance. Do I really need it? Or is there another insurance I can purchase that will sufice. Any info greatly appreciated. Isabel.

    • LSM Insurance
      February 27, 2010 at 12:34 pm

      Thanks for the note Jagdeep. Mortgage insurance pays your beneficiary a tax free lump sum if you die and or become sick this money can be used to pay off your mortgage and other houshold expenses.

    • jagdeep sohal
      February 26, 2010 at 10:39 pm

      hii sir i have question that is
      how is mortgage insurance secure ur home what do they do for secure ur home