How Much Mortgage Life Insurance Costs in Canada
Is mortgage life insurance worth the investment? Learn what you can expect to pay for mortgage life insurance in Canada. With average industry rates for 2023.
How much does mortgage life insurance cost in Canada?
The cost of mortgage life insurance varies based on a number of factors including:
- Your provider
- Your age (priced on an age range)
- The insured mortgage amount
In plain terms, mortgage life insurance is coverage only meant to cover your mortgage. The premium is added to your mortgage payment. If you pass away, your mortgage balance is paid to the bank.
As an example, we’ve pulled rates for TD’s mortgage coverage, breaking down the cost of mortgage life insurance based on the applicant’s age.
Average mortgage life insurance premium in Canada
Even though there is no age limit for mortgage life insurance policies, rates are more expensive the older you are when you apply. Rates are also more expensive the bigger your mortgage is.
Is mortgage life insurance more expensive than term life insurance?
Mortgage life insurance tends to be much more expensive than standard life insurance rates. And the cost can add up: you can save up to $12,285 over a 25-year amortization period by going with term life insurance instead!
Cost comparison: term or mortgage life insurance?
Not only is term usually cheaper, but the structure of a mortgage policy differs slightly too. The payout for mortgage policies is not fixed. So as you pay off your mortgage, you end up paying more premiums despite your payout decreasing.
But why does mortgage life insurance cost so much?
Mortgage life insurance is so costly because it is underwritten after a claim is made, reports the Globe and Mail, so the company assumes everyone has the same level of "risk."
This is regardless of whether or not you smoke a pack of cigarettes a day or if you exercise daily. So if you are of average health, you’re not getting the most affordable coverage possible if you choose mortgage life insurance.
All this to say: you probably have better options out there. For instance, term life insurance offers more flexibility and is more affordable – for the same coverage (or more!).
When is term life insurance not the cheaper option?
One scenario in which mortgage life insurance can be a cheaper option is if you have a pre-existing condition. This is because all applicants are treated the same, which is different from how term life insurance works.
But a word of caution:
Before applying for mortgage life insurance, get a quote for a term policy first and see if you get rated and by how much.
This will give you a better idea of your options and whether mortgage life insurance is a good fit for your needs.
Is life insurance on a mortgage worth it in Canada?
Having some form of life insurance coverage is definitely worth it if you’ve got a mortgage and financial dependents.
Mortgage life insurance isn't mandatory in Canada, but it's a valuable option to consider, especially if you’ve got pre-existing conditions that would make it difficult for you to get term coverage at a good price.
For the average Canadian family, we suggest:
- Try applying for term life insurance first
- If that doesn't work, then head over to a no medical policy
- Consider mortgage life insurance plans as a last resort
[fs-toc-omit]Bottom line: Term is (usually) the better, more flexible option
- If you're a young family with a mortgage, having some kind of coverage is prudent.
- But mortgage life insurance may not be the budget-friendly choice.
- Term is generally less expensive than other types of insurance, like mortgage life insurance and even whole life insurance.
- Term life insurance is an affordable and flexible life insurance option and offers a death benefit for a specific period of time, usually ranging from 1 to 30 years.
- If you want insurance coverage that is flexible and won't break the bank, go for a term life insurance policy instead of mortgage life insurance.
[fs-toc-omit]FAQ: What is mortgage life insurance in Canada?
Our goal is to provide you with honest, trustworthy information to help you make informed decisions. While our content is created with insurance experts, it is for educational purposes only and should not be considered definitive professional financial advice. We recommend seeking the counsel of a licensed financial advisor before making any decisions regarding insurance or personal finance.
The prices listed in this article have researched and fact-checked with both internal and external sources. Prices are based on publicly available rates as of March 2023.
Our sources:
Financial Services Commission of Ontario, Corporate Policy and Public Affairs Branch. (n.d.). What kind of mortgages are available? https://www.fsco.gov.on.ca/en/mortgage/Pages/kinds-of-mortgages.aspx
Johnson, G. (2017, May 23). Do you need mortgage insurance? The Globe and Mail. https://www.theglobeandmail.com/report-on-business/do-you-need-mortgage-insurance/article35064918/
Protection for your Mortgage. (2023). www.td.com. Retrieved March 21, 2023, from https://www.td.com/content/dam/tdct/document/pdf/personal-banking/td-592258-mort-new-en.pdf
Vecina, E. (2020, November 27). Sorry, Gen Z: The average first-time buyer in Canada is 36 years old. Canadian Mortgage Professional. https://www.mpamag.com/ca/news/general/sorry-gen-z-the-average-first-time-buyer-in-life insurance canada-is-36-years-old/286833
Our mission is to empower Canadians to make informed financial decisions. To achieve this, we have an expert editorial team that includes licensed insurance advisors and financial planners. We prioritize the best interests of Canadian families and won't endorse any product, company or financial strategy that we believe isn't suitable. Our educational guides are crafted by in-house experts, like licensed life insurance advisors. Before publication, we subject our research and advice to scrutiny and comprehensive revisions for accuracy and completeness.
Our mission is to empower Canadians to make informed financial decisions. To achieve this, we have an expert editorial team that includes licensed insurance advisors and financial planners. We prioritize the best interests of Canadian families and won't endorse any product, company or financial strategy that we believe isn't suitable. Our educational guides are crafted by in-house experts, like licensed life insurance advisors. Before publication, we subject our research and advice to scrutiny and comprehensive revisions for accuracy and completeness.