Just Say NO to Mortgage Life Insurance with the BANK! There's a BETTER option!

When most Canadians are signing the paperwork for their mortgage, part of the process is for your banker to ask you to consider using the bank's mortgage insurance to cover the balance of the mortgage in the event of death. So, for the sake of convenience, you sign the application to use the bank's insurance to fulfill this need.It's simply smart business and economic sense to cover your debts with life insurance, but is using the bank's mortgage insurance the best way to do so?


The following table shows a cost comparison between 4 of Canada's largest bank's mortgage insurance plans versus owning a personal life insurance policy.


Male & Female - both age 37, non-smokers in good health


Mortgage amount - $250,000


Life Insurance Coverage - $250,000 on each person for a total of $500,000 of level coverage


Bank Insurance Coverage - Decreasing term coverage which pays the balance only




Monthly Premiums

Bank of Montreal

$75.00 + PST

RBC Royal Bank

$72.50 + PST


$80.00 + PST

TD-Canada Trust

$80.00 + PST

Personal Life Insurance Policy*

$49.57 - No PST


In the following table, we'll show you the difference in features and benefits between using the bank's "convenient" mortgage insurance versus using a personal life insurance policy to cover your mortgage.



Bank Mortgage Insurance

Personal Life Insurance to cover your mortgage

Does the Death Benefit Remain Level?


As your mortgage decreases, so does your coverage. But your premium stays the same. So as your coverage decreases, your cost per $1,000 of coverage increases

The death benefit will pay only the balance of the mortgage upon death.


The death benefit of a personal plan remains level for as long as you own the plan unless you decide to decrease the coverage.

The death benefit will be whatever the face amount of insurance that has been purchased.

Am I the Owner of the Policy?


The bank has total control over your coverage and can cancel it at any time


You own the coverage and are the only one who can cancel it. Any changes to the policy can only be made by you, the owner.

Can I choose the Beneficiary of the Policy?


You have NO choice as to who the beneficiary is when you purchase the bank's mortgage insurance.


You have the choice of whoever you want to name as beneficiary of your life policy. Upon death, your survivor may choose not to pay the mortgage off immediately as there may be more attractive investments other than paying off the mortgage.

Will the Death Benefit pay for both my spouse and me in the event of a common disaster?


In the event of a common disaster (ie. of a husband and wife are both killed in a car accident) the bank will pay the mortgage balance only.


When using personal insurance, the insurance company will pay a death benefit on both of the lives insured. For example, if a husband and wife are covered for $150,000 each for their mortgage, the benefit would be $300,000 versus whatever the balance is on the mortgage at the bank.

Is the coverage Portable?


If you want to move your mortgage to another institution, you will have to reapply for mortgage insurance. This will then be purchased at your new attained age at a higher premium, assuming you are healthy enough to qualify for the coverage.


No matter where you have your mortgage, your coverage will stay with you. You do not need to worry about re-qualifying for coverage. You would only have to prove insurability if you needed to increase your coverage.

Is the Underwriting done at the time of application?


When using the bank's insurance, underwriting of the insured will be done at the time of death. In this way, more problems than not can arise as the bank's insurer will try to dispute the claim.


Using personal coverage, the underwriting is done at the time of application. So in the event of a death, the insurance will pay the claim. The company does have the option of contesting in the first two years after application in the event of fraud or non-disclosure. After two years, the claim will be paid promptly.

Are Preferred Rates available if I'm in excellent health?



Many companies offer preferred rates if you are in excellent health which results in a lower premium compared to a standard rate.

Is the insurance plan Convertible?



If you require, you can convert your policy to a permanent plan of insurance if the term policy has this feature (almost all do).

Can I Continue the coverage after the mortgage is paid?


The day your last mortgage payment is made, your mortgage insurance terminates. If you die the next day after paying your mortgage, no benefit is paid.


When your mortgage is paid, you have the option to continue the coverage, convert the coverage or cancel the coverage. The choice is totally yours.

Are there any other Options and Benefits available?


There is no option to add any additional benefits or riders


Various options and riders are available to add to your coverage such as Accidental Death, Child Term Rider, Disability Waiver, etc.


Call me today and I will introduce you to the best professionals in the industry, who will give you the best advice possible and ensure that you and your family are protected!



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