Is this coverage right for you?

Another thing to consider during your low mortgage rate shopping process is Mortgage Life Insurance, which is different than Mortgage Default Insurance.

What is Mortgage Insurance?

Mortgage Insurance is also referred to as mortgage life insurance and creditor insurance. In Canada, banks use post-claims underwriting for Mortgage Insurance. They only confirm that you qualify after you submit a claim.

Here are a few reasons why you should look at options other than Mortgage Insurance:

• Coverage decreases over time

While your premiums stay the same for the duration of your mortgage, the coverage you’re receiving is actually declining with your Canadian mortgage rate balance.

• Coverage is not everlasting

Your mortgage insurance will only last as long as the “term” of your mortgage.

• The lender is the beneficiary

Assuming that your claim has been approved, the lender is the beneficiary and the money goes straight into their pockets.

What’s the Alternative?

Another option is to purchase Term Life Insurance. With Term Life Insurance your coverage doesn’t decrease over time, you’re approved beforehand, and the money goes straight to you.

Term Life Insurance

The most common types of term life insurance for mortgage protection are 10-year, 20-year, and 30-year terms. These products charge constant premiums for that time period. No medical exams in the middle, no re-qualifying, and no increase in premiums.

Life Insurance Bonuses

Individual term life insurance products are not tied to your mortgage.

Name Your Own Beneficiary

Plus, most term life insurance policies in Canada have what’s known as a conversion privilege. This allows you to trade in your term life insurance policy for a permanent life insurance policy – without a medical exam.

Other benefits of life insurance include:

• Discounts are available based on your health and your family history
• Premiums are taxed at a much lower rate
• Flexible – you can change mortgage lenders and take the coverage with you if you move homes or you can convert a term policy into a permanent policy
• Policy terms don’t change and in most cases the policy premiums are guaranteed

If you’re shopping for mortgage insurance, you should consider life insurance as an alternative option. 

Shop Around

Compare life insurance rates to the mortgage insurance rates offered by your bank.

Top It Up

Consider buying or topping up an individual life insurance policy to cover your best mortgage rate instead of using mortgage insurance.

Speak to an Expert

Speak to a licensed insurance broker, not just your mortgage broker, to get advice on coverage.