Mortgage Insurance vs. Individual Life Insurance

Mortgage Insurance or Personal Life Insurance? Here’s why Personal Life Insurance is the better option

Your home is the largest and most important financial commitment you will make. Insuring your home in case of the loss of a primary earner may be your top priority. We can help ensure that your home is protected with the insurance that suits your needs.

Mortgage Insurance vs. Life Insurance

Below is a comparison chart outlining the differences between Mortgage Life Insurance, offered through your mortgage lender vs. Personal Life Insurance, offered through a Licensed Life Insurance Broker/Advisor.

  • The bank is the owner of the policy and you have no control over it
  • Lender is the beneficiary
  • The group policy can be terminated by the insurer at any time
  • Your insurance ends with the mortgage
  • Premiums can change if the group experiences change
  • Insurance terminates if you change lenders, you must re-qualify all over again
  • Cannot be more than the amount of the mortgage
  • Coverage decreases with your mortgage


  • You own the policy
  • Beneficiary of your choice which can be changed anytime
  • Your coverage is guaranteed
  • Your policy is guaranteed renewable and convertible
  • Premiums are Guaranteed
  • The insurance remains if you change lenders, change the mortgage, or buy another home
  • Can also include other needs outside of the mortgage i.e., income replacement, kid’s education, final expenses etc.
  • Coverage stays the same regardless of mortgage


Mortgage Lender’s Insurance

Banks offer Mortgage Life Insurance that is limited to your mortgage Balance only and is offered through a group plan. The plan is not an individual plan and Monthly rates will increase every 4-5 years and expire at age 70. The underwriting is usually done at claim time, or when it’s time to collect! For an additional cost, Mortgage Insurance with the bank may include Critical Illness for up to 4 Illnesses (Life threatening Cancer, Heart Attack, Stroke & coronary artery bypass surgery). Disability benefits with the bank may be paid for a period of 24 monthly only.

Bank’s Definition of a disability

Disability or ‘Disabled’ means any medical condition that prevents you from performing substantially all of the essential duties of your job. In essence, this means you must be totally disabled to qualify.

What Can I get with an Individual Plan through a Life Insurance Carrier that is separate from the Bank’s Mortgage Insurance?

A package can be customized & Tailored for each individual that can include: Life Insurance, Critical Illness (25 illnesses) & Disability benefits up to the age of 65. The Individual Life Insurance plan can be the balance of your mortgage or a higher amount of coverage. This can be a fixed Term for 20-40 years, depending on your age/mortgage amortization (usually 20-30 years) and the primary beneficiaries will be your choice and not the bank. This will allow your beneficiary to receive the death benefit and continue to make monthly payments on your mortgage, or pay the remaining balance and keep the difference.

Critical Illness Coverage

Critical Illness includes 25 Illnesses and a lump-sum benefit will be paid out to you directly should you be diagnosed with one of the 25 Critical illnesses listed in your policy. This lump-sum benefit can be $50,000, $100,000 or an amount of your choice. We will help you calculate the amount you’d need based on the expected costs of a Critical Illness and what you will need to help you with your recovery.

*25 covered Illnesses include: Aortic Surgery, Loss of Independent Existence, Aplastic Anemia, Loss of Limbs, Bacterial Meningitis, Loss of Speech, Benign Brain Tumor, Major Organ Failure on Waiting List, Blindness, Major Organ Transplant, Cancer (Life Threatening), Motor Neuron Disease, Coma, Multiple Sclerosis, Coronary Artery Bypass Surgery, Occupational HIV Infection, Deafness, Paralysis, Dementia-including Alzheimer’s Disease, Parkinson Disease and Specified Atypical Parkinsonian Disorders, Heart Attack, Severe Burns, Heart Valve Replacement or Repair, Stroke, & Kidney Failure. Loss of independent existence means a definite diagnosis of the total inability to perform, by oneself, at least 2 of the following 6 activities of daily living for a continuous period of at least 90 days with no reasonable chance of recovery.

Disability Benefits

Disability benefits of $2,000 or more can continue till the age of 65 (2 or 5 year benefit period available as well) and the definition of disability would be an inability to perform the important duties of your occupation. The benefit amount chosen should be enough to cover your monthly mortgage payments. Benefits from an injury or illness can continue for a period of 2 years, 5 years or till the age of 65, depending on the benefit period chosen by the insured. The longer the benefit period, the higher the monthly premium would be. All applicants must qualify to be eligible for the coverage. This will more than likely be cheaper than the coverage offered through the bank, primarily due to full underwriting/risk assessment done at time of application. Full underwriting may or may not include a medical exam. This will all depend on the age/health of the applicant and amount of Insurance applied for.

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CBC Marketplace Investigation: In Denial Video

CBC Marketplace conducted an investigation into Mortgage Insurance and the results are extremely shocking. It turns out a routine test at the doctor could be reason to deny your claim, if you don’t mention it. Had a cuff inflated on your bicep? That counts as being tested for high blood pressure. According to the report, the bank staffers selling Mortgage Insurance are not licensed and rarely trained to explain the details and legalities of those Insurance products. The result is people who pay premiums think they are covered, only to realize later that they are not. Please watch this video which demonstrates why Individual Life Insurance through a Licensed Insurance Broker from Life Protection Canada is a much better & safer option than Mortgage Insurance through the Bank.