How Much Does Mortgage Life Insurance Cost? (2023)

Peer reviewed by Tobin Tuff, Certified Life Insurance Advisor
In This Article

Key takeaways:

  • Mortgage life insurance can start at $25 a month, depending on your age when you apply, but premiums grow exponentially from there.
  • Mortgage life insurance cost is on a sliding scale that changes by your age and the amount of coverage.
  • For the average Canadian family, term life insurance is the better option because of its affordability and flexibility.

How much does mortgage life insurance cost in Canada?

How much mortgage protection insurance cost depends on the provider. Your premiums will also depend on:

  • Your age when you apply for the policy
  • The initial insured amount of your mortgage
  • The premium rate

Need a quick refresher on what mortgage life insurance is?

  • With mortgage life insurance, you pay a premium based on your age and the amount of your mortgage, which is then added to your mortgage payment.
  • In the event that you pass away, whatever remains on your mortgage will be paid off and your family will own your home with no further mortgage to pay.

Mortgage life insurance rates change from year to year. But the table below gives you an example of mortgage life insurance premiums based on 2021 rates. This table shows the monthly mortgage life insurance rate based on age at the time of application and mortgage amount.

Age Mortgage Amount TD mortgage life insurance rate per month
30 $250,000 $25
$500,000 $50
$1,000,000 $100
35 $250,000 $35
$500,000 $70
$1,000,000 $140
40 $250,000 $52.50
$500,000 $105
$1,000,000 $210
45 $250,000 $75
$500,000 $150
$1,000,000 $300

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.

Cost comparison (mortgage amount):

  • 30 years old, $250,000 mortgage: $25 per month
  • 30 years old, $500,000 mortgage: $50 per month

Cost comparison (age):

  • 30 years old, $250,000 mortgage: $25 per month
  • 40 years old, $250,000 mortgage: $52.50 per month

Why can mortgage life insurance cost so much?

Mortgage life insurance is expensive because, unlike other types of life insurance, mortgage life insurance premiums aren't based on your health. This type of insurance is not fully underwritten.

Underwriting means the insurance company asks about your health and decides, based on their own data, how risky you are to insure.

Even if it is underwritten, The Globe and Mail reports:

“Mortgage life insurance is typically underwritten post-claim. That means that eligibility is often only determined when it comes time for a payout. And people can be denied at that point.”

Skipping underwriting and getting mortgage insurance could be a good option if you have a pre-existing condition that would make regular life insurance very expensive or challenging. But if you're relatively healthy, which most people are, you won't get a cheaper rate from mortgage life insurance.

Relatively healthy people can get lower premiums with term life insurance in Canada.

How much does term life insurance cost?

Term life insurance is generally cheaper than mortgage life insurance.

As a quick refresher; what is term life insurance in Canada?

  • Term life insurance is a type of life insurance that offers coverage for a fixed period, usually 10 or 20 years.
  • You pay premiums during the policy term.
  • If you pass away during the policy term, your loved ones receive the death benefit as a tax-free payment.

Compared with mortgage insurance, term life insurance tends to be the most affordable type of policy. And it allows you to adjust the amount of insurance coverage to what you need as your life changes over time.

PolicyMe offers some of the lowest rates for term life insurance in Canada. See your rate in just a few clicks.

How does the average cost of mortgage life insurance compare to term life insurance?

Below is a table that shows monthly rates for both TD's mortgage life insurance and PolicyMe's term life insurance.

The rates are based on age at the time of application and the life insurance coverage amount ($250,000, $500,000 etc.).

Note that the term life insurance rates are based on a 20-year policy for a male non-smoker.

Age Mortgage Amount TD mortgage life insurance rate per month Manulife term life insurance rate per month
30 $250,000 $25 $20
$500,000 $50 $34
$1,000,000 $100 $61
35 $250,000 $35 $22
$500,000 $70 $35
$1,000,000 $140 $65
40 $250,000 $52.50 $30
$500,000 $105 $50
$1,000,000 $210 $94
45 $250,000 $75 $47
$500,000 $150 $80
$1,000,000 $300 $153
Pricing based on publicly-available rates as of October 2021. Terms and conditions may apply.

As you can see, term life insurance is cheaper across the board vis-a-vis mortgage protection insurance.

Another thing: your monthly mortgage insurance premiums don't decrease even when your outstanding balance is paid down and your amortization period reaches the end. You pay the same in mortgage insurance premiums every month, even when your mortgage is almost paid off.

To learn more, read our life insurance company reviews.

Why term life insurance is (usually) the better option

Term life insurance is best suited for most Canadian families because it's usually more affordable. Here are five other reasons term life insurance is usually a better option than mortgage life insurance:

1. The beneficiary is your family, not the bank.

It's an important difference, as a mortgage insurance payout just goes to the financial institution that holds your mortgage. So your beneficiaries won't receive any of the money.

Term life insurance works by protecting your family.

2. Your family can pay off debts and expenses other than your mortgage.

In other words, your loved ones can take care of all the expenses they need to, including the mortgage, instead of just having their mortgage paid off.

Not sure how much this will cost you? Our term life insurance calculator lets you input your remaining mortgage balance and monthly payments to help figure out exactly how much life insurance you need, and what it'll cost you per month.

3. The death benefit comes to your beneficiaries as a tax-free lump sum.

They can use this money any way they like, from immediate expenses to mortgage payments to longer-term investments.

4. Your death benefit doesn't decrease over your policy term.

A term life insurance policy might pay out $500,000 if you passed away in the first year of the term, or $500,000 if you passed away 15 years later.

With mortgage insurance, remember the payout will only be the amount of your mortgage, whether that is $500,000 or $50,000. According to Tobin Tuff, Certified Life Insurance Advisor at PolicyMe, mortgage life insurance

“becomes a worse deal for you with every mortgage payment you make.”

5. You can keep the policy if you switch mortgage providers.

Over the years, you may change mortgage providers, change your bank or financial institution, use a broker to find a better mortgage rate or move. You can keep a term life insurance policy throughout these transitions.

6. Your coverage can extend beyond the length of your mortgage term.

A term life insurance policy can cover your mortgage costs if necessary but can also extend beyond it. For example, your beneficiaries would still receive the death benefit from a term life insurance policy if you pass away in the years afterward.

7. There's a higher chance of your claim getting denied.

According to Tuff, mortgage life insurance providers "have a very stringent payout process. There is a high chance for errors on the application which would make your claim get denied. A lot of claims are denied."

Term life insurance also allows you flexibility in how you structure your coverage and premiums.

For example, you could:

  • Try a “set it and forget it” solution where you simply purchase term life insurance for 20 or 30 years, depending on the length of your mortgage. You might pay more monthly, but you won't have to worry about it for the rest of your mortgage term.
  • Opt for a more strategic and flexible approach by purchasing a 10-year policy for a lower cost for half or ¾ of your mortgage. Your premiums will be relatively low for this first term, after which you can purchase a second term to cover the balance.

With technology, PolicyMe is able to deliver the same quality, underwritten coverage in fewer steps. At our core, we believe that getting term life insurance shouldn't be complicated. So, we've made it simple.

Receive an instant quote, apply in minutes and find out if you're approved right away. No waiting and no hassle.

When is term life insurance not the cheaper option?

Term life insurance can sometimes be more expensive than mortgage life insurance because mortgage life insurance policies only cover the outstanding balance and the amortization period of your mortgage. Life insurance should protect your family, and they may need to pay for a lot more than a mortgage if the unexpected happened.

There may be other loans to pay back, college to save for, retirement to consider. And your family may not have the savings to cover them.

You could go with a higher-coverage term policy, which could mean a more expensive monthly premium.

Is mortgage life insurance necessary?

Mortgage life insurance isn't mandatory in Canada, but it's important because it protects your family from worrying about making mortgage payments in the unlikely event you're not around to make those payments.

You and your partner may have chosen the best home your could afford. It may also mean you need both incomes to cover the mortgage payment.

Mortgage protection insurance is a step you can take to make sure your mortgage will always be paid off and that there's never any stress around how to cover payments. 25% of Canadian families (with kids under the age of 18) have mortgage life insurance, according to our recent survey But term life insurance is a better option for most Canadian families as the money goes to families, not creditors. 

“I got sucked into getting [mortgage] life insurance that I didn't want when I bought my house,” says Lauren Sheriff, a Toronto-based content creator and mom. “It was a part of the bank's must-haves for me in order to qualify for my mortgage.”

Lauren did want life insurance to protect her family from mortgage debt, but she wanted it on her own terms. She wanted to choose her own coverage, term length and price.

Learn more about Lauren's journey with mortgage life insurance:

Bottom line: Term offers better, more flexible protection than mortgage

If you have a mortgage and a young family, having some sort of coverage for your mortgage only makes sense. It's easy to see from the cost comparisons that term life insurance is usually cheaper than mortgage life insurance. And sometimes, it's cheaper by a lot.

In short, if you're looking for broad coverage that's flexible and affordable, pass on mortgage life insurance and buy a term life insurance policy instead.

Ready to see how affordable term life insurance can be?

FAQ: Mortgage life insurance cost in Canada

Is mortgage life insurance the same as mortgage loan insurance?

No, these are two totally different policies. A mortgage loan insurance policy covers the lender should you default on your mortgage. This policy is often mandatory if you put less than 20% down on your home. A mortgage life insurance policy is a completely optional insurance plan that pays off your outstanding mortgage balance if you pass away.

When should I consider mortgage life insurance?

You should consider a life insurance policy to cover at least your mortgage if you have an outstanding mortgage balance and dependents relying on you financially. If you have a home with a mortgage balance but no dependents, a mortgage life insurance policy is not necessary, though the bank may repossess the home if the unthinkable happens and your next of kin cannot keep up with the payments.

Laura McKay

COO & Co-Founder

About the Author

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