What are the best mortgage insurance companies in Canada?

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You did it! You purchased your brand new dream home and cannot wait to move in and start making your house a home. During the excitement, you pause to think about what steps you need to take to be sure your beautiful new home is fully protected – you have insurance in place in the event of fire or flooding. But what happens to your mortgage if something happens to you?

Many homeowners face the same question; if you were not around, could your family continue to pay for the mortgage? 

Mortgage protection insurance may be just what you need to be sure that your loved ones are protected in the event of a death. It also may be a good option if you do not qualify for traditional life insurance or desire additional protection.

What is mortgage protection life insurance?

Mortgage life insurance or mortgage protection insurance is a policy that pays off a mortgage in the event of the death of the borrower. The terms are used interchangeably in this article.

It is a product offered by many life insurance companies and banks. It is essentially a term life insurance that equals the mortgage’s length. Under a typical term life insurance policy, you may choose your beneficiary. Mortgage life insurance policies are a little different. The beneficiary is always the lender, who will be paid the remaining balance of your mortgage. 

That means your family only benefits indirectly. Rather than money, this policy leaves them a paid-off home and place to live. 

Imagine you owe $150,000 on your mortgage when you pass away, the mortgage protection insurance policy will pay off the balance. The policy will pay off that remaining mortgage. The home will now be mortgage-free, but your family will have no say in how that money is spent (the insurer pays it directly to the lender).

One of the downsides of mortgage life insurance is that it provides a declining payout. As time goes by, you chip away at the balance of your mortgage through monthly payments. These decrease the potential payout. With mortgage insurance, your overall coverage decreases, but your premiums do not necessarily follow. Some providers now offer “level death benefit” so the payout remains the same, even when the mortgage debt dips below the value of the coverage amount. 

What is the difference between mortgage life insurance and mortgage default insurance?

Mortgage life insurance and mortgage default insurance sound like similar products. They are easy to confuse. Mortgage default insurance may be required without a 20% downpayment, while mortgage life insurance is entirely optional. Refer to the chart below to compare the two and see if mortgage life insurance could be right for you. 

Type of InsuranceMortgage life insuranceMortgage Default Insurance
Who is the beneficiary of the policy?The lender is the beneficiary and uses the insurance to pay off the mortgage in the event of your death.The lender is the beneficiary in the event that you default on your mortgage.
Is it mandatory?Coverage is not mandatory in Canada.Coverage is mandatory if your down payment is less than 20%
What happens if I move my mortgage?Mortgage insurance is not transferable. If you move your mortgage to a new lender, you must resubmit for insurance. This may result in premium increases.Your insurance stays unchanged for the entire term of your policy.
Do premiums increase?Premiums are subject to fluctuation.Premiums will remain the same.
Is sales tax applicable?Sales tax is not applicable.Sales tax is applicable.
Mortgage life insurance vs mortgage default insurance

Mortgage default insurance, which is sometimes referred to as CMHC insurance, protects the lender and is mandatory without a 20% downpayment. See our mortgage default insurance guide to learn more.

How much does mortgage protection insurance cost? 

The cost of your mortgage insurance will depend on the amount of your mortgage. Spending on your age, premiums range from 10 cents to $1.65 for every $1,000 in coverage. However, because you pay down your mortgage amount over time, the amount left on your mortgage that will be covered in the policy will also decrease.

If you were to purchase a $600,000 house with a 15% ($90,000) down payment, this means a mortgage of $510,000. If you purchase mortgage life insurance premiums you would pay them on that $510,000 amount for the life of the mortgage. If 10 years later, you have paid down your mortgage to $310,000, you would still have the same premium for mortgage life insurance. The amount of coverage has dropped from $510,000 to only $310,000 as your mortgage amount has decreased.

Need a quote? Just use the comparison tool at the top of this page to get and compare prices on mortgage protection insurance

What does mortgage protection insurance cover? 

A mortgage life insurance policy covers mortgage debts and associated costs. These policies do not pay out unless a borrower dies while there is still a balance on the mortgage. The beneficiary is the mortgage lender, but it provides a paid-off home for the borrower’s family. 

Mortgage protection insurance is an indirect way of protecting one’s family when compared to a traditional life insurance policy on which they would be the direct beneficiary.

How much mortgage insurance do I need?

For a mortgage life policy, an insurer will require you to purchase enough mortgage insurance to cover the cost of your mortgage. For example, if you purchase a $750,000 home and pass away during the life of the loan, this would pay off the entire remaining balance on the mortgage. Without full coverage, you would potentially have less coverage than what is owed on the home.

What is the difference between mortgage life insurance and life insurance?

Mortgage life insurance and life insurance sound similar so it is easy to confuse the two products. However, there are many important differences between each type of policy. See our chart that breaks down the main differences to make sure you are purchasing the right plan for you.

Type of insuranceMortgage protection/mortgage life insuranceTerm life insurance
Who is the beneficiary of the policy?The lender is the beneficiary and uses the insurance to pay off the mortgage.You designate beneficiaries when you purchase the policy. They may use the money however they see fit, including to pay off the remaining mortgage.
Does the coverage expire?Your coverage will end when your mortgage is paid off. You pick the term of your policy. It is unrelated to the length of any mortgage.
What happens if I move my mortgage?Mortgage insurance is not transferable. If you move your mortgage to a new lender, you must resubmit for insurance. This may result in premium increases.Your insurance stays unchanged for the entire term of your policy.
What happens if you pass away?The coverage will pay off whatever is left on the balance of your mortgage. If you pass away and still owe $50,000, then the insurance will cover that amount.Your beneficiaries get the full amount of your policy.
What if I get sick and can’t work to pay the mortgage payments?A mortgage life insurance plan will not cover the payments. This kind of coverage is offered through disability insurance available privately or through an employer.Disability is not covered by a life insurance plan. A death will need to occur to trigger a payout.
Do my premiums change?The premiums remain unchanged for the term of the mortgage even though you continue to pay down your mortgage.Premiums may change if you decide to renew your policy at the end of a term (according to your age or new health issues).
Mortgage life vs term life insurance

Have you been turned down for term life insurance? Mortgage life insurance may be a good alternative for you. It is less difficult to purchase than term life insurance if you have underlying health conditions. It may not even require a medical exam.

What companies provide mortgage protection insurance or mortgage life insurance?        

Many banks in Canada have options for new homebuyers to add on mortgage life insurance either directly through the bank itself or an affiliated insurance company. The maximum coverage you can apply for along with the types of add-on coverage and monthly payments will vary from bank to bank and company to company. 

Popular products include:        

  • Canada Life mortgage insurance
  • Cibc mortgage life insurance
  • Manulife mortgage protection plan
  • RBC mortgage life insurance
  • Scotiabank mortgage protection insurance
  • Sun Life mortgage insurance
  • TD mortgage protection insurance

Need a quote? Try the comparison tool at the top of this page. Get a quick, anonymous quote on mortgage protection insurance now.

Are there other ways of protecting a mortgage?

For most Canadians, your home is your largest asset. Fortunately, there are multiple ways to protect it. It is wise to protect your ability to continue to pay your mortgage each month. What will happen if you are severely injured and cannot work? Or what about your family and other bills that you have, how will those be taken care of in the event of your death? While mortgage life insurance will pay off the remaining balance on your home, there are other forms of insurance to protect not only your mortgage but also basic monthly income:

  • Traditional life insurance pays out a beneficiary of your choosing in the event you pass away unexpectedly. It lets them continue to pay bills and daily living expenses including mortgage payments.
  • Critical Illness insurance pays out in the event that you are diagnosed with a severe illness and are unable to work.
  • Disability insurance is similiar to critical illness insurance. It pays out if you are diagnosed with an illness or injury and are unable to work for a temporary or permanent amount of time.
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