How Much Mortgage Life Insurance Costs in Canada (2023)

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Stephanie Roux
,
Certified Life Insurance Advisor

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In This Article

Key takeaways:

  • Mortgage life insurance can start at $76.50 per month for a 35-year-old man for $500,000 in coverage. 
  • The cost of your mortgage life policy mostly depends on your age, gender and the coverage amount.
  • For most Canadian families, term life insurance is a better choice because it's more flexible and affordable.
  • Mortgage life insurance premiums aren't based on your health history, making it  pricier than other types of coverage.
  • Term life insurance can be up to 79% cheaper than most mortgage life products on the market.

How much does mortgage life insurance cost in Canada?

The average mortgage life insurance cost in Canada is $74.44 per month, pulling rates for coverage from $200,000 to $800,000 for a 35-year-old man. 

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

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.

mortgage insurance average cost

Average mortgage life insurance premium in Canada

The average mortgage life insurance premium starts at $76.50 per month for $500,000 in coverage over 20 years, according to recent data from TD. 

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?

The average first-time home buyer is 36 years old. To compare costs between mortgage life insurance and term life insurance, a 35-year-old man would pay: 

  • $85 per month for mortgage life insurance
  • $31.46 per month for term life insurance

Take a look below to see some examples of cost comparisons:

mortgage insurance vs term life insurance average cost

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: 

  1. Try applying for term life insurance first
  2. If that doesn't work, then head over to a no medical policy
  3. Consider mortgage life insurance plans as a last resort

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 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.

FAQ: What is mortgage life insurance in Canada?

Is mortgage life insurance the same as mortgage loan insurance?

No, mortgage loan insurance and mortgage life insurance are not the same things. Mortgage loan insurance policies are mandatory in Canada if you put down less than 20% on your home. It covers the mortgage lender in case you default on your mortgage.

On the other hand, mortgage life insurance policies are optional and help pay off your outstanding mortgage balance if you pass away. It's a way to protect your family from losing their home or facing financial hardships if something happens to you.

Is mortgage life insurance a waste of money?

No, mortgage life insurance is not a waste of money. While paying off your mortgage if you pass away can provide peace of mind, it's essential to weigh the cost against the benefits.

You may find that a term life insurance policy is a more cost-effective way to protect your family's financial future. Make sure you weigh out your options and talk to a professional to determine what's right for you.

How long do you pay mortgage life insurance for?

The length of time you pay for mortgage life insurance in Canada depends on the term of your policy. This could be anywhere from a few years to the entire length of your mortgage, depending on the policy you choose and the financial institution or insurance company you go with.

If you pass away before your mortgage life term ends, your policy will pay out the remaining balance of your mortgage to your designated beneficiary. 

Meaning that your loved ones will not have to take on any mortgage debt. In many cases, choosing a term life insurance policy over a mortgage insurance policy may serve your and your family's needs better, as it covers more than just the mortgage, paying out a cash lump sum to your beneficiaries rather than to a financial institution. 


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-canada-is-36-years-old/286833

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