Mortgage Life Insurance: Coverage, Quotes, Cost 2024
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- Fixed or decreasing insurance amount
- Ideal for mortgage protection
- Fixed premiums and guarantees
- Option to convert to permanent life insurance without medical evidence
- Keep your coverage even even as you pay off your mortgage
- The coverage amount remains the same
- Select a beneficiary to inherit the death benefit
- Repayment of the balance of a mortgage loan when the holder passes away
- No waiting period to validate coverage
- Options for monthly, biweekly, or weekly payments
- Coverage up to $1 million per person
- Free quote with no obligation
- Insurance needs calculator available
- 50% or 100% coverage options
- Possibility to subscribe to mortgage disability insurance
Mortgage life insurance pays off the remaining balance of your mortgage in the event of your death, ensuring your family can continue living in the home without the financial burden.
But how is it different from life insurance? Do you need mortgage life insurance? What does it cost? We've got you covered. In this guide, we help you understand mortgage life insurance inside out.
Discover how mortgage life insurance works, its distinctions from traditional life insurance, and how to choose the best plan tailored to your needs. Plus, with our free comparison tool, you can compare top plans and get free personalized quotes.
Mortgage life insurance: 5 Key takeaways
- Mortgage life insurance pays off your mortgage if you pass away, ensuring your family keeps the home.
- Unlike traditional life insurance, the beneficiary is always the lender.
- Coverage decreases as you pay down your mortgage.
- Mortgage life insurance is optional, but a good alternative if you don't qualify for standard life insurance.
- Premiums may not decrease even as your mortgage balance does.
What is mortgage life insurance?
Mortgage life insurance, also known as mortgage protection insurance, pays off a mortgage in the event of the death of the borrower. The terms have been used interchangeably in this article.
It is essentially like a term life insurance policy 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.
How does mortgage life insurance work?
Imagine you owe $150,000 on your mortgage when you pass away, the mortgage protection insurance policy will pay off the balance. The insurer pays the remaining mortgage directly to the lender. The home will now be mortgage-free.
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.
Mortgage life insurance vs life insurance: What is the difference?
Mortgage life insurance and life insurance sound similar so it is easy to confuse the two products. However, there are many important differences between them. See our table that breaks down the main differences to make sure you are purchasing the right plan for you.
| Coverage | Mortgage protection/mortgage life insurance | Term life insurance |
|---|---|---|
| Who is the beneficiary? | Coverage ends when the mortgage is paid off. | You designate beneficiaries when you purchase the policy. They may use the money as they wish. |
| Does the coverage expire? | The insurance stays unchanged. | You pick the term. 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. | Insurance stays unchanged. |
| What happens if I pass away? | The coverage will pay off whatever is left on the balance of your mortgage. If you pass away and owe $50,000, then the insurance will cover it. | Your beneficiaries get the full amount. |
| What if I get sick and can’t work to pay the mortgage? | A mortgage life insurance plan will not cover the payments. This kind of coverage is offered through disability insurance. | Disability is not covered by life insurance. Payout is triggered only upon death. |
| Do premiums change? | Premiums remain unchanged. | Premiums may change if you renew your policy. |
Example of picking between life insurance and mortgage protection insurance
Benedict, 35, from Ontario, has just bought a house worth $150,000 with a $19,000 deposit. As his deposit is under $20,000 he has to buy mortgage insurance. However, he is not obligated to buy mortgage life insurance.
As he is young and in good health he will probably get a good deal on a term life insurance plan. If he takes out a policy now and keeps up with payments he will be well protected by the time his health becomes more at risk when he gets older.
Have you been turned down for <a href="https://hellosafe.ca/en/life-insurance">term life insurance</a>?
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.
Are mortgage life insurance and mortgage default insurance the same?
While both types of insurance are related to mortgages, they differ significantly. Mortgage default insurance, which is sometimes referred to as CMHC insurance, is a prerequisite for homeowners making a down payment of less than 20% on their mortgage and protects the lender of the mortgage. Let's see how it is different from mortgage life insurance.
| Type of Insurance | Mortgage Life Insurance | Mortgage Default Insurance |
|---|---|---|
| Who is the beneficiary? | 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 if 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. |
How much is mortgage life insurance?
The cost of mortgage life insurance in Canada is influenced by a variety of factors, such as the size of your mortgage, your age, health status, smoking habits, and the details of the policy you choose. Premiums can be as low as $10 or exceed $100 monthly.
Taking a $500,000 mortgage as an example, a 35-year-old non-smoker in good health may typically see premiums ranging from $20 to $50 per month. This estimate is quite general, as actual premiums can vary depending on your unique circumstances and the insurer's assessment criteria.
While the policy's coverage decreases as you pay down your mortgage, the premiums do not decrease, this could impact the policy's long-term value for you.
Moreover, factors like advancing age or smoking can significantly affect your premiums, with insurers often charging higher rates for older applicants and smokers due to the increased risk they represent. To find the best rate, it's crucial to compare quotes from multiple providers or you could simply use our HelloSafe comparator at the top of this page.
Mortgage life insurance cost
Here are quotes for TD mortgage protection for a 35-year-old Ontario resident for different mortgage amounts with monthly payments.
| Age | Mortgage Amount | Monthly Premium |
|---|---|---|
| 35 | $250,000.00 | $81.21 |
| 35 | $500,000.00 | $154.65 |
| 35 | $1,000,000.00 | $266.97 |
Need a mortgage life insurance quote?
Just use the free comparison tool at the top of this page to get and compare prices from the best providers in Canada. You can get multiple quotes in a few quick steps. All you need to do is enter basic information including your name, province, age, smoker status, how long you wish to be covered, and the amount of coverage.
How much mortgage protection insurance do I need?
The amount of mortgage protection insurance you need should match the outstanding balance of your mortgage to ensure full coverage in the event of your death.
For example
For example, if you have a $300,000 mortgage, your insurance coverage should be at least $300,000 to pay off the entire mortgage. This ensures that your family won't have to worry about mortgage payments during a difficult time. As you pay down your mortgage, the amount of coverage needed will decrease correspondingly.
How to find the best mortgage life insurance?
Here are some key tips to help you find a mortgage protection insurance that suits your needs the best.
- Assess your needs: Determine the coverage amount that matches your mortgage balance to ensure your family's home is fully protected.
- Check the insurer's reputation: Research customer reviews and financial strength ratings of insurance companies to choose a reliable provider.
- Compare policies: Use online comparison tools to evaluate different plans, focusing on coverage, premiums, and exclusions.
- Understand policy terms: Read the fine print for details on premiums, coverage duration, and conditions where the policy may not pay out.
The best way to find the best mortgage life insurance deal is by using our free online comparison tool below. You can add the details of your specific situation, compare leading providers, and get personalized quotes.
The best mortgage life insurance
What are the best mortgage life insurance plans in Canada?
Let's take a look at some of the policies provided by Canada's big names.
| Provider | Policy name | Max benefit |
|---|---|---|
| iA Financial Group | Pick-A-Term Mortgage Insurance | $10,000,000 |
| Sun Life | Life and Disability Insurance | $750,000 |
| Manulife | Mortgage Protection Insurance | $1,000,000 |
| Canada Life | Mortgage Life Insurance | $500,000 |
| BMO | Mortgage Protection Insurance | $650,000 |
| Humania | Mortgage Insurance | $1,000,000 |
| RBC | HomeProtector Mortgage Insurance | $750,000 |
| CIBC | Life Insurance for Mortgages | $750,000 |
| TD | TD Mortgage Protection | $1 million |
Here is a brief overview of the best mortgage insurance plans in the market.
iA Financial Group: Pick-A-Term mortgage insurance
The IA Financial Group offers versatile and cost-effective mortgage insurance solutions. It underscores the importance of tailoring mortgage insurance to individual circumstances. Their offerings come with distinct advantages that conventional lending institutions may not provide.
One notable benefit is the flexibility to retain mortgage insurance even when switching lenders during mortgage renewal. This provides homeowners with continuity and the freedom to choose their beneficiaries.
Additionally, IA Financial Group ensures that premiums are fixed based on the individual's profile, irrespective of potential changes in health conditions. This stability is particularly advantageous, offering financial predictability in the face of life's uncertainties.
In unfortunate circumstances of disability or death, IA Financial Group's insurance coverage manages mortgage payments or other outstanding loans. This comprehensive approach to financial protection positions IA Financial Group as a reliable and customer-focused choice for homeowners seeking mortgage insurance.
Within their product portfolio, IA Financial Group presents Pick-A-Term, a solution that allows homeowners to customize their insurance term duration, ranging from 10 to 40 years. This comes with the assurance of stable premiums and the added flexibility of converting to permanent life insurance at any point.
Another notable offering is the Universal Loan Insurance, strategically designed to cover debt repayment in case of disability, extending its benefits to both homeowners and tenants.
Sun Life: Life and Disability Insurance
Sun Life, one of the largest insurance companies in the world, offers both Life and Disability Insurance with mortgage protection to an upper limit of $750,000. It also offers critical illness and disability insurance protection on insurances.
Sun Life mortgage protection offers a premium rate of 10 cents to $1.13. You may be able to renegotiate your premium rate if you can pay a lump sum payment of $5,000 or more to your mortgage lender.
In the event of a disability claim, SunLife provides a monthly benefit of up to $4,000 per insured, considering all mortgages combined. This benefit can be claimed for a maximum period of 24 months per disability claim.
Additionally, there is a lifetime maximum payment period of 48 months, ensuring continued support and financial stability for homeowners during challenging times.
Sun Life will not cover the death of a policyholder from war or civil unrest unless the policyholder is a serving member of the Canadian Armed Forces.
It is worth noting that to facilitate the prompt resolution of insurance claims, customers must make sure to raise their claim within 90 days of the date of the end of the qualifying period. You can use this calculator to get a better understanding of the premiums and options.
Manulife: Mortgage protection insurance
Manulife, one of Canada's largest life insurance companies, offers both Mortgage Disability Insurance and Mortgage Life Insurance plans, providing budget-friendly payment options - Monthly, semi-monthly or weekly. Both coverages can start immediately and come with a 60-day money-back guarantee thereby letting you explore options while being covered.
The Disability Insurance from Manulife offers generous coverage of up to $10,000 per month for a combined maximum duration of 24 months. In addition, it also provides its customers with a bonus disability payment to assist homeowners in their recovery once they get back to work if they have not already received the maximum number of payments.
Homeowners will also have the option to complement their coverage with mortgage life insurance for added protection.
Manulife's mortgage insurance offers a substantial coverage of up to $1 million per person. An exceptional feature called the Life Bridge Benefit ensures that homeowners are not financially burdened while their life claims are being reviewed by covering mortgage payments. This benefit bridges the gap until the claim is settled.
Additionally, homeowners have the option to enhance their coverage with mortgage disability insurance for comprehensive protection. Find out how much mortgage you can afford here.
Canada Life: Mortgage Life Insurance
Canada Life offers life insurance on your mortgage to all borrowers, co-borrowers, and guarantors aged between 18 and 64, and who are residents of Canada. The policy covers the outstanding debt on a mortgage if the policyholder dies unexpectedly, up to a limit of $500,000. Canada Life may require a health assessment in these circumstances:
- If you have experienced serious illness within the last 2 years
- If have a history of drug or alcohol abuse
- If you have a history of depression or other psychiatric issues
- If you have any immune diseases
The formula for working out the monthly premium amount is the amount of your mortgage multiplied by the applicable premium rate, divided by 1,000 and with additional taxes added on.
The premium rate for Canada Life mortgage protection is set based on your age and smoker status. The rate can range between 11 cents to $1.64 for a smoker and 7 cents to 88 cents for a non-smoker.
Good to know
The life insurance benefit can be calculated with the following formula. The amount of mortgage you are insured for, divided by the mortgage loan amount, multiplied by the outstanding mortgage balance at the date of death.
For example: if you had a $600,000 mortgage. Canada Life's mortgage life policy insures you up to a limit of $500,000. Let's say the outstanding balance a the time of death is $400,000. The calculation would go: 500 000 divided by 600,000 equals 0.83 x 400,000 equals $333,333. Use this calculator to calculate how much mortgage you can afford and plan accordingly.
BMO: Mortgage Protection Insurance
BMO Canada provides comprehensive mortgage insurance coverage with options for different circumstances. Under their life insurance coverage, homeowners can get a maximum coverage of $750,000.
In the event of a covered critical illness, such as cancer, heart attack, coronary artery bypass surgery, or stroke, BMO's critical illness insurance can help cover the mortgage balance up to a maximum of $450,000, with the coverage amount being equal to or less than the percentage of life coverage.
BMO's mortgage insurance also includes disability insurance up to a maximum monthly amount of $3,000. Benefits are paid for up to 24 months per disability, with a 30-day qualifying period before benefits start.
Additionally, BMO offers job loss insurance up to a maximum monthly amount of $3,000. Job loss benefits are paid for up to 6 months per job loss, with a 60-day qualifying period before benefits start. You can use this calculator to put a number to your insurance premium based on your selected coverage options.
Humania: Mortgage insurance
Humania Assurance, a mutual insurance company with roots going back to 1874, specializes in providing innovative insurance solutions tailored to Canadians. Based in Saint-Hyacinthe, Québec, it offers a range of products, including mortgage life insurance.
Humania's mortgage life insurance is notable for its accessibility and the option for coverage without a medical exam, catering to those who may have difficulty obtaining insurance due to medical reasons.
With options for varying coverage amounts and terms, this insurance is customizable to individual needs and situations, ensuring homeowners have peace of mind regarding their mortgage commitments.
There are coverage options up to $1 million and also the availability of a complete digital experience for signing up.
RBC: HomeProtector Mortgage Insurance
The Royal Bank of Canada offers a premium rate of between 10 cents and $1.63 for non-smokers. The life insurance coverage is up to $750,000.
If you are taking out a joint policy then the premium rate will be calculated using the older partner's age. RBC also offers critical illness and disability insurance policies that specifically protect your mortgage.
With Critical Illness Insurance, in the event of a covered critical illness such as life-threatening cancer, heart attack, or stroke, it provides the option to pay off or reduce the outstanding insured balance of your RBC Royal Bank mortgage. The coverage for Critical Illness Insurance can go up to $300,000.
On the other hand, Disability Insurance provides coverage of up to $3,000 per month for a maximum period of 24 months. This insurance helps protect you by providing financial assistance to cover your mortgage payments in case you become disabled due to illness or injury.
Once you apply for mortgage insurance, your premium will be based on your age and mortgage balance, and this rate will remain locked in.
Your premium will not increase with age, as long as your mortgage balance remains the same throughout the life of your mortgage and you do not refinance it. Get your premium calculation here.
CIBC: Life Insurance for Mortgages
CIBC has a higher benefit limit of $750,000. Policy buyers must be between the ages of 18 and 64 and be residents of Canada. One additional stipulation notes that the policy will not pay out if the holder dies in the commission of a crime (meaning this is not the right mortgage protection for bank robbers).
Good to know
CIBC's premium rates are slightly higher than Canada Life's ranging from 8 cents for a non-smoker in their twenties to $1.62 for a non-smoker in their sixties. Customers have 30 days starting from the date they receive the Certificate of Insurance to review their coverage and assess if it aligns with their requirements.
Should you decide to cancel your coverage within this review period, you will receive a complete refund of any premiums you have paid. This allows you the opportunity to carefully evaluate your insurance and make an informed decision that suits your needs.
Note: members of the Canadian armed forces are exempt from the minimum residency requirement of 183 days per year that applies to other applicants.
Calculate what your mortgage payment could be with the help of this calculator.
TD Mortgage Protection
TD offers a higher death benefit limit than its competitors of $1 million. Consequently, its premium rates are also higher, between 13 cents and $1.66, and the coverages start instantly.
TD Mortgage Life Insurance can provide up to $1,000,000 towards several crucial aspects, including your outstanding TD Mortgage balance (after deducting any arrears), discharge fees, prepayment charges, and interest owing.
To further enhance your protection, you can also opt for Mortgage Critical Illness Insurance, which offers coverage of up to $1,000,000 in case of a life-threatening cancer diagnosis, acute heart attack, or stroke.
TD offers a seamless application process with options to access through phone, online, or by visiting a nearby branch. It is known to negotiate a better mortgage interest rate for those who ask, depending on their credit history and financial profile.
Meanwhile, claims must be made within three years of death or the coverage may not pay out. You may only take out one mortgage life insurance policy per mortgage. Deaths caused by intoxication by drugs or alcohol or suicide are not eligible for a payout. You can calculate your mortgage payment using this calculator.
Are there other ways of protecting a mortgage?
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 your basic monthly income.
- Traditional life insurance pays out a beneficiary of your choosing if you pass away unexpectedly. It lets them continue to pay bills and daily living expenses including mortgage payments.
- Critical Illness insurance pays out if you are diagnosed with a severe illness and are unable to work.
- Disability insurance is similar 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.
FAQs on mortgage life insurance in Canada
How much is mortgage life insurance per month?
The cost of mortgage life insurance varies widely depending on factors such as the mortgage amount, your age, and your health status. For a $500,000 coverage, premiums typically begin around $75 per month.
Do I need mortgage insurance if I have life insurance?
No, you don't necessarily need mortgage insurance if you have life insurance. Life insurance can provide a broader financial safety net that may cover your mortgage and other expenses. It's crucial to evaluate your overall financial protection needs to decide.
What happens to life insurance when the mortgage is paid?
When a mortgage is paid off, mortgage life insurance coverage ends as its purpose—to cover the mortgage in the event of death—is fulfilled. There's no payout; instead, the insurance simply ceases to be necessary. The policy's purpose is solely to pay off the mortgage balance, not to provide a general death benefit like a standard life insurance policy.
What is mortgage life and disability insurance?
Mortgage life and disability insurance combines two types of coverage: one that pays off your mortgage in the event of your death (life insurance component) and another that covers your mortgage payments if you become disabled and unable to work (disability insurance component).
This insurance ensures that your mortgage will be taken care of, either by paying it off or by making regular payments, under these specified circumstances. You can check out our guide on combined life and disability insurance in Canada.
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