What Ontario Parents Need to Know About Life Insurance and Mortgages

When you close on a home in Ontario, your bank will almost certainly offer you mortgage life insurance. It seems convenient — check a box and your mortgage is covered if something happens to you. But is it actually a good deal?

In most cases, a personal life insurance policy is a far better choice than bank mortgage insurance. Here's why.

How Bank Mortgage Insurance Works

Mortgage insurance from your bank (sometimes called creditor insurance) pays off your remaining mortgage balance if you pass away. Sounds straightforward, but there are several catches:

• Decreasing benefit: As you pay down your mortgage, your coverage decreases — but your premiums stay the same
• The bank is the beneficiary: The payout goes directly to the bank, not your family
• Post-claim underwriting: Some policies assess your health after a claim is made, which means you could be denied when it matters most
• Not portable: If you switch banks or pay off your mortgage, you lose coverage

How Personal Life Insurance Compares

A personal term life insurance policy that covers your mortgage amount (and more) offers significant advantages:

• Level benefit: Your coverage amount stays the same for the entire term
• Your family decides: The death benefit goes to your chosen beneficiary — they can pay off the mortgage, cover living expenses, or use it however they need
• Pre-approved underwriting: Your health is assessed when you apply, so your family has certainty that the claim will be paid
• Portable: Your policy stays with you regardless of your mortgage or banking relationship
• Often cheaper: Personal policies are frequently less expensive than bank mortgage insurance

Cost Comparison: A Real Ontario Example

Consider a 35-year-old non-smoking homeowner in Ottawa with a $500,000 mortgage:

• Bank mortgage insurance: approximately $90-120/month (decreasing coverage)
• Personal 20-year term policy for $500,000: approximately $25-35/month (level coverage)

With a personal policy, you'd pay less and get better coverage. Over 20 years, that's a potential savings of over $15,000.

What About Your Spouse?

If both you and your partner are on the mortgage, you each need coverage. Bank mortgage insurance typically covers only the primary borrower. With personal policies, each of you can get individual coverage tailored to your specific needs.

The Bottom Line for Ontario Homeowners

Don't just check the box at your bank. Take 3 minutes to compare personal life insurance rates — you'll likely find better coverage at a lower price. Your family deserves a policy that puts them in control.

Get your free Insurly quote and see how much you could save compared to bank mortgage insurance.