Best Mortgage Insurance Canada

Buying a home is likely one of your largest investments, and your mortgage will probably be your biggest annual expense. If you have financial dependents, what would happen if you pass before repaying the mortgage? Could your surviving spouse afford to pay off the mortgage alone? This is where mortgage protection can help. It repays the balance on your mortgage if you pass away, ensuring your loved ones won’t lose their home.

Home buyers often need to buy mortgage protection coverage due to low initial deposits. However, there are alternatives such as life insurance that can provide similar protection without obligating the buyer to go through the bank or lender. Another option to consider is private mortgage protection, which can also serve as an alternative to traditional mortgage protection.

However, mortgage insurance is not life insurance. While it shares some similarities with life insurance, it’s a unique financial product.

How is it different from life insurance? Do you need it? What does it cost? And which are the best companies offering this coverage in Canada? Read on to find the answers to these questions.

Key Takeaways:

• Mortgage insurance pays off the mortgage upon your death
• The payout decreases over time as you repay the mortgage 
• The death benefit is paid to the lender, not your family
• Mortgage insurance is easier to qualify than term life insurance, but the latter can cover other expenses as well
• Manulife, iA financial group, Sun Life, and CIBC Insurance are among our top picks for the best mortgage insurance companies in Canada.

What is mortgage life insurance?

It is a special financial product designed to repay the mortgage balance when you die. The proceeds of the policy go directly to the mortgage lender, not your family.

The policy payout matches the outstanding mortgage balance at any given point in time. It reduces over time as you pay the mortgage installments. However, your monthly premium remains the same throughout the duration of your policy. Mortgage insurance premiums are integrated into your monthly mortgage payments and are commonly offered by banks during the mortgage application process. The length of the policy term is the same as the repayment period for your mortgage.

How Does Mortgage Insurance Work?

Mortgage insurance is a type of insurance that protects lenders from borrowers who default on their mortgage payments. It is usually required for borrowers who make a initial payment of less than 20% of the purchase price of the home.

In the event that a borrower defaults on their mortgage, the lender can file a claim with the insurance company to recover some or all of the outstanding mortgage balance. The company will then pay the lender the amount of the claim, minus any deductible or co-payment.

Mortgage insurance can provide several benefits to borrowers, including:

• Lower initial payment requirements: Help borrowers qualify for a mortgage with a lower initial payment, which can make it easier to purchase a home.
• Lower interest rates: Help borrowers qualify for lower interest rates, which can save them money on their monthly mortgage payments.
• Greater flexibility: Provide borrowers with greater flexibility when it comes to their mortgage payments, as they may be able to make lower payments or skip payments altogether.

However, mortgage insurance can also have some drawbacks, including:

• Higher costs: Increase the cost of a mortgage, as borrowers must pay premiums in addition to their monthly mortgage payments.
• Limited coverage: Only covers the lender in the event of default, and does not provide any protection to the borrower.
• Complexity: Complex and difficult to understand, which can make it difficult for borrowers to make informed decisions about their mortgage.

Types of Mortgage Insurance: Mortgage Default Insurance and Mortgage Life Insurance

Mortgage default insurance (CMHC) is a type of insurance that protects lenders from borrowers who default on their mortgage payments. It is usually required for borrowers who make an initial payment of less than 20% of the purchase price of the home. Mortgage default insurance can be either public or private, and it is typically paid by the borrower as part of their monthly mortgage payment.

Mortgage life insurance, on the other hand, is a type of insurance that pays off the outstanding mortgage balance in the event of the borrower’s death. Mortgage life insurance coverage is usually optional, but can provide peace of mind for borrowers who want to ensure that their loved ones will not be burdened with mortgage payments in the event of their death.

Who Needs Mortgage Insurance?

Mortgage life insurance is a crucial financial safeguard for certain individuals and families. Here are some key groups that should consider mortgage insurance:

• Homeowners with a Mortgage: If you have a mortgage, mortgage life insurance can protect your family from financial hardship in the event of your death. It ensures that your loved ones can continue to live in the home without the burden of mortgage payments.
• Homebuyers with a Mortgage: When purchasing a home with a mortgage, mortgage life insurance provides peace of mind. It guarantees that your family can stay in the home even if you’re no longer able to make mortgage payments due to unforeseen circumstances.
• Families with Dependents: If you have dependents, such as children or a spouse, mortgage life insurance is essential. It ensures that they can continue to live in the home and maintain their standard of living even if you’re no longer there to provide for them.
• Individuals with a High Debt-to-Income Ratio: If your debt-to-income ratio is high, mortgage life insurance can be a valuable safety net. It protects your family from financial strain in the event of your death, ensuring that the mortgage payments are covered.

By considering mortgage protection, you can provide a financial safety net for your family, ensuring that they can remain in their home regardless of what life throws your way.

Mortgage Life Insurance Policy

A mortgage life insurance policy is a type of insurance designed to pay off the outstanding balance of your mortgage in the event of your death. This policy ensures that your loved ones are not burdened with mortgage payments during an already difficult time. Typically, the term of a mortgage life insurance coverage matches the length of your mortgage, and the coverage amount decreases as you pay down your mortgage.

When considering a mortgage life insurance plan, keep the following factors in mind:

• Coverage Amount: Ensure that the coverage amount matches the outstanding balance of your mortgage. This guarantees that your mortgage will be fully paid off if you pass away.
• Term: Choose a term that aligns with the length of your mortgage. This ensures continuous coverage throughout the life of your loan.
• Premiums: Compare premiums from different insurance companies to find the best rate. Premiums can vary significantly, so shopping around is crucial.
• Riders: Consider adding riders, such as critical illness insurance or disability insurance, to enhance your coverage. These riders can provide additional financial protection in case of severe illness or disability.

By carefully evaluating these factors, you can select a mortgage life insurance policy that offers the right level of protection for your family.

Mortgage Insurance vs. Life Insurance

Given the similarities between mortgage life insurance and life insurance — death benefit, policy term, and level premium, to name a few — it’s easy to confuse the two. However, there are major differences between them, as the following table shows. 

Example of selecting between mortgage insurance and term life insurance

Robert, 33, from Alberta has just bought his first house, for which he took a mortgage of $200,000. Since Robert hasn’t yet built up a lot of savings and has two young kids, ages 3 and 1, he wants to buy an insurance policy to cover his mortgage. He’s likely to get lower rates with term life insurance, as he has no underlying medical issues and is in reasonably good health.

On the other hand, Claudia, age 43, from Ontario, might find mortgage life insurance a better fit since she has Turner’s Syndrome — a women-only autoimmune disorder that impacts longevity. Because mortgage life insurance has much more lenient eligibility criteria than traditional term life insurance, she can qualify for it despite underlying health issues. Mortgage life insurance coverage specifically covers the mortgage balance in the event of the policyholder's death, unlike standard life insurance which provides a general death benefit. With her mortgage balance covered, Claudia, who’s the main breadwinner of her household, can rest easy in the knowledge that her common-law partner, Akira, age 51, will not lose their home if something happened to her. Additionally, companies like Manulife offer various mortgage protection options with additional benefits included in their mortgage life insurance policies.

Is mortgage life insurance and mortgage default insurance one and the same thing?

No, they are two different financial products. Mortgage default insurance (also referred to as CMHC insurance) is a mandatory coverage you need to have if you are putting in less than a 20% initial payment.

How much does mortgage insurance cost? 

How much premium you’ll pay for mortgage life insurance depends on several factors, most of which are unique to you.

• Age
• Health status
• Smoking status
• The details of your policy
• Your choice of insurer

Comprehensive mortgage life insurance coverage can include options like critical illness, disability, and job loss insurance, providing extensive protection against unforeseen circumstances.

Monthly premiums can be as low as $12 or go beyond $120.

For example, someone who’s 30 years of age and in reasonably good health may pay monthly premiums in the range of $15 and $25 for a mortgage of $500,000. This is a general estimate since the exact premium amount depends on personal factors and the insurance company’s risk assessment methodology.

While the death benefit amount reduces as you repay the mortgage, the monthly premium doesn’t change, which could affect the plan’s long-term value. Furthermore, factors such as smoking or advancing age can cause your premium rate to jump up significantly. To secure the lowest possible rate, it’s important you compare quotes from multiple providers.

Regular mortgage payments can also contribute to improving your credit score.

How much mortgage insurance should I buy? 

To assess your coverage needs, ask yourself: Would your surviving spouse be comfortable paying part of the mortgage balance after you’re gone? Or would you rather have full coverage in the event of your death?

If you want to ensure your family inherits your home, not your debts, it would be best to buy a policy that matches the remaining balance on your mortgage. Mortgage loan insurance is another type of mortgage-related insurance product that protects the lender in case of default, and it differs from mortgage life insurance and mortgage protection insurance.

For example, if the outstanding mortgage balance is $200,000, your mortgage life insurance plan should start with a death benefit of $200,000 to repay the loan in full. This ensures the burden of repaying the mortgage won’t fall on your dependents. As you pay the monthly mortgage installments, the policy’s death benefit will decrease accordingly.

Benefits of Mortgage Insurance

Mortgage insurance can provide several benefits to borrowers, including:

• Lower initial payment requirements: With mortgage life insurance, borrowers can qualify for a mortgage with a lower initial payment, which can make it easier to purchase a home.
• Lower interest rates: Mortgage life insurance can also help borrowers qualify for lower interest rates, which can save them money on their monthly mortgage payments.
• Greater flexibility: Mortgage life insurance can provide borrowers with greater flexibility when it comes to their mortgage payments, as they may be able to make lower payments or skip payments altogether.
• Peace of mind: Mortgage life insurance can provide peace of mind for borrowers who want to ensure that their loved ones will not be burdened with mortgage payments in the event of their death.

Which are the best mortgage insurance companies in Canada? 

Manulife, iA Financial Group, Sun Life, CIBC Insurance, Scotiabank, TD, Humania Assurance, and BMO are our top picks for the best mortgage life insurance companies in Canada. However, it is quite possible that other insurers may fit your situation better. For this reason, consider getting quotes from as many providers as possible—something an independent broker can assist you with.

We rated mortgage protection insurance companies in Canada on a range of key metrics, including coverage details, ease of application, customization options, etc. Next, we categorized insurers based on the areas in which they are the best. 

Manulife: Best for Unique Benefits

Manulife is one of the biggest insurance providers in Canada and their Mortgage Protection Insurance helps you safeguard your loved ones, your home, and your savings in case something happens to you.

Product Name: Mortgage Protection Insurance

Key Features: 

• No waiting period
• Maximum coverage is $1 million per person
• Partial coverage option available
• 60-day money-back guarantee
• Covers mortgage payments until a submitted claim is processed
• Every applicant is eligible for some level of mortgage insurance protection

Why We Picked Manulife

Manulife stands out as one of the best mortgage life insurance options in Canada, especially due to its exceptional features. It is arguably the only Canadian insurer that guarantees to cover your mortgage payments while your claim is being reviewed. This support alleviates financial stress on your family during challenging times. Additionally, Manulife offers zero waiting periods, comprehensive protection, and the opportunity to enhance your plan with generous mortgage disability coverage.

iA Financial Group: Best for Comprehensive Coverage

Pick-a-term mortgage life insurance is not a pure mortgage protection insurance policy. Instead, it combines elements of mortgage life insurance and term life insurance, allowing you to meet a broader range of financial needs with a single plan.

Product Name: Pick-A-Term Mortgage Insurance
Key Features:

• Benefit amount of up to $20 million
• Portable coverage
• Choose any term length from 10 to 40 years
• Two types of coverage: Level and Decreasing to 50%
• Guaranteed renewal option
• Convert to permanent life insurance at the end of the policy term
• A wide range of add-ons

Why We Picked iA Financial Group

If you’re in the market for a plan that covers more than your mortgage, Pick-A-Term may be right up your alley. While it offers the decreasing death benefit option, it comes packed with many of the best features of term life insurance: guaranteed renewability, a wide array of riders, conversion option, and the freedom to pick your beneficiaries. 

iA Financial is no slouch when it comes to offering high-dollar coverage, either. It offers up to $20 million in coverage. This was one of the highest-value policies of all the insurance companies we reviewed. While the additional coverage means higher premiums, it could be worth the cost for small business owners or high-net-worth individuals. 

Sun Life: Best for Portability

Sun Life Mortgage Protection Insurance coverage doesn’t end when you switch lenders — an appealing feature if portability sits high on your priority list. 

Product Name: Mortgage Protection Insurance

Key Features

• A mix between life insurance and critical illness
• More flexible benefits than your standard mortgage protection policy
• You choose your beneficiaries
• Policy term options are 10, 15, 20, and 30 years
• Death benefit remains the same throughout the policy term

Why We Picked Sun Life 

Sun Life Mortgage Protection Insurance’s USP is portability. Your coverage remains in force even when you switch lenders. The fact that it covers multiple financial needs and gives you the freedom to pick your beneficiary is an added bonus. 

CIBC Insurance: Best for Multiple Coverage Options

One of the main limitations of standard mortgage life insurance is that it pays out only in the event of the insured’s death. But with CIBC, you can protect your mortgage payments from whatever life throws your way. 

Product Name: Mortgage Life Insurance

Key Features

• Offers up to $750,000 in coverage
• Protects your family if you were to pass away too soon
• Can supplement the coverage with mortgage critical illness and mortgage disability insurance for comprehensive protection
• Available to Canadian residents between the ages of 18 and 64

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Why We Picked CIBC

CIBC stands out for its different mortgage protection coverages. Apart from mortgage life insurance, which takes care of your mortgage balance upon your death, you have the option to buy mortgage critical illness and mortgage disability insurance coverage. 

Scotiabank: Best All-Round Protection for Scotiabank Clients

Scotiabank offers not one but four types of valuable insurance protection, but coverage is available only to Scotiabank clients. 

Product Name: Mortgage Protection

Key Features: 

• Protects your mortgage balance, either in full or in part, against four unexpected life events: death, disability, job loss, and critical illness
• Most people can qualify by answering only three simple health-related questions
• Maximum mortgage life insurance protection is $1 million
• Coverage details and expected premium rates based on age available on the website

Why We Picked Scotiabank

Scotiabank protects your home from an unexpected loss of income due to death, disability, job loss, and critical illness. The application process is simple and quick, and most applicants don’t need to undergo a medical exam. A quick visit to the Scotiabank website gives you a fair idea of how premiums are calculated, a feature that other Canadian insurers would do well to include on their websites. Scotiabank is also one of the few players to offer discounted rates for higher mortgage amounts. 

TD: Best for Three-in-One Coverage

TD Mortgage Life Insurance helps repay the mortgage balance if you experience an unexpected covered event. 

Product Name: Mortgage Protection

Key Features:

• Pays up to $1 million toward your mortgage balance in the event of death, accidental dismemberment, and a covered terminal illness
• Coverage available to only TD clients
• Higher coverage amounts may require completing a health interview
• Option to supplement coverage with mortgage critical illness insurance cover

Those who have TD mortgages can buy affordable three-in-one coverage, with the option of adding comprehensive mortgage critical illness cover. It provides up to $1 million in coverage if you are diagnosed with acute heart attack, stroke, or life-threatening cancer. 

Humania Assurance: Best No-Medical Mortgage Insurance

Humania Assurance is one of the oldest mutual insurance companies in Canada and is known for its innovative insurance solutions.

Product Name: Mortgage Insurance

Key Features:

• Provides mortgage protection up to $1 million
• No medical exam needed
• Easy, simple, and fast application process
• Freedom to customize coverage to suit your unique needs

Why We Picked Humania Assurance

Humania understands you’ve worked hard to provide a home for your family and it is important to protect it against life’s uncertainties, regardless of your current health status. 

BMO: Best for Tailor-Made Coverage

BMO covers your mortgage payments in the event of death, disability, critical illness, and job loss, but you can pick-and-choose the types of coverage you need. 

Product Name: Mortgage Protection Insurance

Key Features:

• Comprehensive mortgage protection insurance coverage in different circumstances
• Maximum coverage in the event of death is $750,000
• Critical illness insurance covers mortgage balance of up to $450,000
• Disability insurance pays $3,000 a month for up to two years
• Job loss insurance pays $3,000 a month for up to 6 months

Why We Picked BMO

BMO helps you cover your 100% or 50% of your mortgage payments. Different types of mortgage protection coverage are available, making it easier to create a plan that best meets your insurance needs. 

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How to decide if mortgage insurance is right for you?

When it comes to covering your mortgage payments, you have two options: term life insurance and mortgage life insurance. 

How to decide which one is a better option? 

While there’s no one-size-fits-all answer as everyone’s situation is unique, the following tips will help you make an informed decision. 

Term Life is Cheaper

Term life insurance is usually a good fit for most people, since it’s cheaper than mortgage life insurance. 

Wondering why is that so?

Mortgage insurance plans don’t require a physical. This might sound convenient, but the privilege of securing coverage without a medical exam comes at a cost, and understandably so. The more the insurer knows about your health, the more accurately it can assess your risk profile, which invariably translates into lower premiums for reasonably healthy applicants. 

Even where the difference between the premiums is nominal, term life insurance comes out cheaper in the long term. This is because with term life, your beneficiary receives the same amount of death benefit whether you die 10 days or 10 years after buying the policy. By contrast, mortgage life insurance has a decreasing death benefit, though premiums remain the same throughout the policy term. 

Term Life Gives You and Your Family More Control

When you buy a term life policy, you can nominate anyone as the beneficiary. During the course of your policy’s term, you can update the beneficiary designation whenever you want. Upon your death, your beneficiary is free to use the policy proceeds however they like. If repaying the mortgage is no longer a top priority, they can use the funds for more pressing needs.

However, in the case of mortgage life insurance, the death benefit goes directly to the mortgage lender—not your dependents.

A Single-Term Life Plan Can Meet Different Financial Needs

Apart from covering your debts, a term life plan can help replace the loss of income your family will experience in the event of your premature demise. The death benefit can help your surviving spouse maintain their standard of living, pay for your children’s education, and cover other future expenses.

But having said all this...

If you are unable to qualify for term life insurance due to poor health, mortgage life insurance is a good alternative. Although it’s pricier, it does cover your mortgage balance, giving you peace of mind that your family will not lose their home should you die before repaying the mortgage.

Is Mortgage Protection Insurance Worth It?

Mortgage protection insurance can be a valuable investment for homeowners who want to ensure their loved ones are protected in the event of their death. While it may seem like an additional expense, mortgage protection insurance offers peace of mind and financial security.

Here are some benefits of mortgage protection insurance:

• Pays Off the Outstanding Mortgage Balance: In the event of your death, the insurance will pay off the remaining mortgage balance, ensuring your family can stay in their home.
• Provides Financial Protection: This type of insurance ensures that your loved ones are not burdened with mortgage payments, allowing them to focus on other financial needs.
• Customizable: Mortgage protection insurance can be tailored to fit your specific needs and budget. You can choose the coverage amount and term that best suits your situation.
• Additional Benefits: Many policies offer additional benefits, such as critical illness insurance or disability insurance, providing comprehensive protection.

However, it’s essential to weigh the costs and benefits before making a decision. Consider the following:

• Premiums: Mortgage protection insurance premiums can be higher than those of traditional life insurance policies. Ensure that the premiums fit within your budget.
• Coverage: Make sure the coverage amount matches the outstanding balance of your mortgage to avoid any shortfall.
• Term: Choose a term that matches the length of your mortgage to ensure continuous coverage.

By carefully considering these factors, you can determine if mortgage protection insurance is the right choice for you.

Mortgage Insurance and Your Credit Score

Mortgage insurance can have an impact on your credit score, but it’s not always a negative one. Here are a few things to consider:

• Tax-Deductible Premiums: In some cases, mortgage life insurance premiums can be tax-deductible. This can help reduce your taxable income and lower your tax bill, providing a financial benefit.
• Improving Your Credit Score: Regular mortgage payments can positively impact your credit score over time. Mortgage life insurance adds an extra layer of protection, ensuring that your mortgage payments are made even if you’re unable to work due to illness or injury. This consistent payment history can help improve your credit score.
• Peace of Mind: Mortgage life insurance provides peace of mind for homeowners who are concerned about their ability to make mortgage payments in the event of illness, injury, or death. Knowing that your mortgage is covered can reduce stress and allow you to focus on recovery or other important aspects of your life.

Overall, mortgage life insurance can be a valuable tool for homeowners who want to protect their family from financial hardship. By understanding how mortgage life insurance works and how it can impact your credit score, you can make an informed decision about whether or not to purchase a policy.

Mortgage Insurance and Your Mortgage Term

Mortgage insurance is often tied to the length of your mortgage term. When you purchase a mortgage, you typically have the option to choose a mortgage term that ranges from 5 to 25 years. The length of your mortgage term will impact your mortgage life insurance premiums and coverage.

Here’s how mortgage life insurance works with different mortgage terms:

• Short-term Mortgage: If you choose a short-term mortgage, your mortgage life insurance premiums will be higher, but your coverage will be lower. This is because the risk to the insurer is concentrated over a shorter period.
• Long-term Mortgage: If you choose a long-term mortgage, your mortgage life insurance premiums will be lower, but your coverage will be higher. This spreads the risk over a longer period, resulting in lower premiums.

It’s essential to consider your mortgage term when purchasing mortgage insurance. A longer mortgage term may provide lower premiums, but it may also mean that you’ll pay more in interest over the life of the loan. Balancing the term length with your financial goals and budget is crucial for making the best decision.

Mortgage Insurance and Your Down Payment

In Canada, if you put down less than 20% of the purchase price, you’ll be required to purchase mortgage default insurance. This type of insurance protects the lender in case you default on your mortgage payments.

Here’s how it affects your mortgage life insurance:

• Low Down Payment: If you put down less than 20%, you’ll be required to purchase mortgage default insurance, which can increase your premiums. This insurance is designed to protect the lender, but the cost is passed on to you, the borrower.
• High Down Payment: If you put down 20% or more, you may not be required to purchase mortgage default insurance, which can lower your premiums. A higher amount reduces the lender’s risk, resulting in lower insurance costs.

It’s essential to consider your initial payment when purchasing mortgage life insurance. A higher initial payment may provide lower premiums, but it may also mean that you’ll have less flexibility in your budget. Balancing your initial payment with your financial goals and the cost of mortgage insurance is key to making an informed decision.

By understanding how your initial payment and mortgage term affect your mortgage insurance, you can make better financial decisions and ensure that you have the right coverage for your needs.

Alternatives to Mortgage Insurance

There are several alternatives to mortgage protection, including:

• Private mortgage insurance: Private mortgage insurance is a type of insurance that is offered by private companies, rather than the government. It can provide similar benefits to mortgage default insurance, but may have different terms and conditions.
• Mortgage protection insurance: Mortgage protection insurance is a type of insurance that pays off the outstanding mortgage balance in the event of the borrower’s death or disability. It can provide similar benefits to mortgage life insurance, but may have different terms and conditions.
• Life insurance: Life insurance can provide a death benefit that can be used to pay off the outstanding mortgage balance in the event of the borrower’s death. It can provide similar benefits to mortgage life insurance, but may have different terms and conditions.
• Disability insurance: Disability insurance can provide income replacement benefits in the event that the borrower becomes disabled and is unable to work. It can provide similar benefits to mortgage disability insurance, but may have different terms and conditions.
• Job loss insurance: Job loss insurance can provide financial protection by offering income replacement benefits if the borrower loses their job. It can help cover mortgage payments during periods of unemployment.

How can I find the best mortgage protection insurance policy in Canada?

If you’re in the market for a mortgage life insurance policy, the following tips will come in handy. 

• Assess your insurance needs

Do you want to cover the entire outstanding balance of your mortgage or a certain portion of it, like 75% or 50%? Unless you have a sufficiently large savings pot, it would be a smart idea to go in for a plan that covers the entire mortgage balance.   

• Compare prices

Premium rates vary widely between top life insurance companies, so don’t forget to do comparison shopping. Experts recommend getting quotes from at least three providers. 

• Check the insurance company’s reputation

The provider offering the best price is not always the best (or safest) option. Don’t sign up with an insurer without checking its financial rating and online reviews. 

• Read the policy terms carefully

Reading an insurance contract may seem a chore, with all the insurance lingo and dense language. All the same, reading it is worth the effort, as that would help you understand coverage details, premium payment details, and exclusions (if any). 

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Conclusion

Mortgage insurance pays off the mortgage when you die. It’s easier to qualify than term life insurance and aligns nicely with your loan balance. But it is not without certain drawbacks, such as a decreasing death benefit and higher premiums than term life insurance. It provides the same benefits as mortgage protection and then some. 

Not sure whether mortgage insurance or term life insurance is best for you? Or wondering how you can quotes from multiple providers? Let Dundas Life help you. Our advisor will take the time to understand your unique circumstances and offer transparent, unbiased advice. We’ll also provide you with free, no-obligation price quotes from multiple insurance companies, so you can secure the best deal. 

Frequently Asked Questions (FAQs)

What happens to mortgage insurance when the mortgage is paid off? 

Mortgage insurance is tied to your mortgage. So, when the mortgage is paid off, the premium payments will stop and the coverage will end. 

Do I have to have mortgage insurance if I have a mortgage? 

No, there’s no law that states you must have mortgage insurance if you take out a mortgage. Nonetheless, it’s always a smart idea to protect your home from an unexpected loss of income. You can do so by buying mortgage insurance or term life insurance. For most people, the latter is a better fit, as it’s cheaper and gives you more control over your policy. 

Does mortgage insurance require a medical exam? 

Generally, mortgage insurance lets you forgo the life insurance medical exam. The insurance companies assess your eligibility based on your answers to a few, simple health-related questions. This makes it a good option for homeowners who cannot qualify for medically underwritten term life insurance. 

Can I cancel my mortgage insurance? 

Yes, you can terminate coverage at any time. Most insurance companies offer a free-look period — usually 30 days. If you cancel the policy during this period, the insurer will refund the initial premium. 

What happens to my mortgage if I die? 

If you die with an outstanding balance on your mortgage, the mortgage provider still needs to be paid. If there’s a co-mortgagee (like a spouse), he or she will be responsible for repaying the mortgage. This is the reason why mortgage insurance can help financially support your loved ones should the unthinkable happen. 

If there’s no co-mortgagee, your estate will repay the mortgage debt from the accumulated assets, which may include savings, investments, life insurance proceeds, jewelry, etc. If the value of accumulated assets is less than the mortgage balance, the lender can sell the house to recoup the debt. 

What are my other options for protecting my mortgage? 

Mortgage insurance protects your mortgage, but you may consider other types of insurance that cover not only your mortgage but also other expenses. 

Traditional term life insurance provides life insurance coverage for a set number of years. It can provide your family with a financial lifeline if you pass away too soon. Your loved ones can use the life insurance payout to pay mortgage installments and other daily living expenses. 

Disability insurance provides you with a steady stream of income if you can’t work due to illness or injury. 

Critical illness pays a tax-free, lump-sum amount if you are diagnosed with a covered condition.