.

Is Mortgage Life Insurance Mandatory In Canada?

Editorial Team
Edited by: Helene Fleischer
Content Marketing Manager
Updated
August 28, 2025

PolicyMe content follows strict guidelines for editorial accuracy and integrity. Learn more about our editorial guidelines

Get a free instant term quote
Your Details
Your date of birth
Your date of birth
Your province
Your gender
Your gender
Male
Female
Do you smoke?
Do you smoke?
Yes
No
(And save 10% off your first year’s premiums)
Your Partner’s Details
Their date of birth
Your date of birth
Their province
Their gender
Your gender
Male
Female
Do they smoke?
Do you smoke?
Yes
No
No credit card or email required
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Key Takeaways
  • Mortgage life insurance is optional in Canada.
  • Mortgage life insurance typically isn’t recommended because it only pays your lender and doesn’t provide any flexible protection for your loved ones.
  • Mortgage life insurance is different from mortgage default insurance, which is mandatory if your down payment is less than 20%.
  • Term life insurance is the more affordable and flexible choice, and the payout can be used for anything—it’s not limited to paying off your mortgage.

Is mortgage life insurance mandatory in Canada?

Mortgage life insurance is not mandatory in Canada. It is an optional type of insurance that pays off your remaining mortgage balance if you pass away. The beneficiary of a mortgage life insurance policy is the bank or mortgage lender, not your loved ones.

Blog Icon
Mortgage life insurance: Not mandatory, and not recommended

Mortgage life insurance typically isn’t recommended because it doesn’t offer flexible financial protection for your loved ones, it only covers the amount of your mortgage. Unlike traditional term life insurance, which offers a tax-free lump sum payout for named beneficiaries to use as they wish, mortgage protection insurance only provides a payout to your bank or lender.

Protect more than your mortgage—get affordable term life insurance with PolicyMe.

Do I need any insurance to get a mortgage?

Mortgage life insurance is never mandatory. However, mortgage insurance (a different type of insurance) is mandatory in Canada if your down payment is less than 20% of the home’s purchase price. It protects your lender by covering the shortfall if you default on your mortgage and the sale of your home doesn’t completely cover your remaining balance.

This type of mandatory insurance is often called mortgage default insurance or CMHC insurance, since it's issued by the Canada Mortgage and Housing Corporation. It is not a form of life insurance. 

How mortgage insurance works

Mortgage life insurance is typically marketed as an affordable product that protects your estate by offsetting the financial burden of your mortgage balance if you pass away. It is usually sold by banks, mortgage lenders or brokers when you take out a mortgage, and premiums are added to your monthly payments.

While it may seem like a safe way to financially protect your loved ones and ensure your mortgage is paid off, it has some major drawbacks:

  • No payout flexibility: Mortgage life insurance only covers your mortgage. It does not provide any additional benefits for your family or loved ones.
  • No portability: It is typically tied to your current mortgage and cannot be transferred to a different mortgage if you sell your house and purchase a new one.
  • Coverage depreciates: The total payout decreases as you pay down your mortgage balance, but premiums stay the same.
  • High premiums: Mortgage insurance premiums can be high compared to other types of life insurance that offer the same or higher value. The more you owe on your mortgage when you purchase your mortgage life insurance policy, the pricier your premiums will be.
  • Post-claim underwriting: Underwriting typically occurs when a claim is made, which means your payout could be denied if your health status deems you ineligible by the insurance provider.

Mortgage insurance vs. term insurance: Why term is the better pick

Mortgage life insurance only covers your mortgage and the payout goes directly to your bank or lender if you pass, whereas term life insurance offers a tax-free lump sum payout for your named beneficiaries, which can be used however they see fit.

With term life insurance, your beneficiaries can use the death benefit to pay off your mortgage, cover final expenses, save for your children’s education, replace lost income, and much more.

Besides payout usage flexibility, there are a few other key differences between these two types of policies that make term life insurance the better choice for homeowners:

Feature
Mortgage life insurance
Term life insurance
Payout receiver
Bank or lender
Your named beneficiaries, chosen by you
Payout usage
Exclusively pays off your mortgage
Can be used however your beneficiaries want; to cover your mortgage, debts, childcare, education, or living expenses
Coverage amount
Decreases as you pay off your mortgage
Remains the same throughout the policy’s term
Premiums
Stay high even as coverage declines
Remains the same throughout the policy’s term
Portability
Not portable; coverage ends if you sell your property or switch lenders
Stays with you regardless of your home or lender
Ownership
Owned by the lender or bank
Owned by you
Cost
Higher premiums for limited coverage and value
More affordable for the same or more coverage
Underwriting
Usually post-claim underwriting, which can lead to denied claims
Underwriting typically happens at the time of application

Bottom line: Term life insurance can provide you with peace of mind and flexible, affordable insurance coverage. Many insurance companies, like PolicyMe, offer customizable plans to help you get the most value from your term coverage during the years you need it most. With PolicyMe, the quoting and application process is completely digital, helping you secure your term life insurance policy without unnecessary paperwork or delays.

Cover your mortgage with affordable term life insurance with PolicyMe

Mortgage default insurance (CMHC) vs. mortgage life insurance

Mortgage default insurance and mortgage life insurance are often misinterpreted as the same thing. However, mortgage default insurance, also known as mortgage loan insurance or CMHC insurance, is a mandatory product for homebuyers who put less than 20% down on a property, and mortgage life insurance is an optional policy type for those who want coverage for their mortgage loan in case they pass.

Both of these mortgage insurance products protect the lender or financial institution rather than the borrower, but there are distinct elements that set them apart. Here’s an overview of the key differences between these two types of mortgage insurance: 

Feature
Mortgage default insurance
Mortgage life insurance
Purpose
Protects the lender if you default on your mortgage
Pays off the rest of your mortgage if you pass away
Who it protects
Your lender or bank
Your lender or bank
How it works
Pays off any shortfall on your mortgage balance after the house is sold
Pays off the rest of your mortgage balance after you pass away
Seller
Mortgage insurers, like the CMHC
Banks and mortgage lenders when you take out your mortgage
Is it mandatory?
Yes, if your down payment is less than 20%
No, it’s optional
Payout receiver
Lender or bank
Lender or bank
Insurance cost
Approximately 2.8% to 4.0% of your mortgage; can be paid all at once or over the amortization period
Premiums are added to your monthly mortgage payments
Portability
Stays with your mortgage until its paid off or refinanced
Not portable; coverage ends if you sell your house or switch lenders

Is mortgage life insurance ever a good idea? 

Mortgage life insurance typically isn’t a good idea for most Canadians. It offers limited financial protection compared to a term life insurance policy, and it can be expensive.

    Mortgage insurance is NOT a good idea if…

  • You want control over how your life insurance payout is used
  • You want to be able to name your own beneficiaries
  • You want your family to gain a flexible death benefit that can go towards more than your mortgage alone
  • You plan to switch lenders or houses, or refinance in the future
  • You want coverage that stays with you and doesn’t decrease while premiums stay high
  • You want peace of mind knowing your policy will payout because it was underwritten when you applied for coverage

Mortgage life insurance scams to look out for 

Many legitimate companies send mail, emails, and call new or first-time homebuyers to pitch mortgage life insurance, but there are also a slew of scammers in the mix.

The first sign of a mortgage life insurance scam? Anyone who tells you it's mandatory. Mortgage life insurance is optional, and anyone who says otherwise is either trying to scam you or they’re misinformed (in which case, they shouldn’t be trusted either).

Other warning signs of a scam include:

  • Pressuring you to purchase without giving you time to review the offer
  • Telling you it’s urgent that you sign off because you’re “already behind on payments”
  • Asking for sensitive information (e.g. your banking or SIN details) over the phone or through email
  • Insisting that mortgage life insurance is tied to your mortgage contract or government-mandated

To avoid these scams, be sure to speak with your mortgage broker, lender, or bank if you are asked to buy mortgage life insurance by a third-party company. They can help you verify the legitimacy of the insurance product and answer any questions you may have.

FAQs

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.

Life Insurance
Life Insurance
Life Insurance
Life Insurance