Mortgage Insurance vs Term Life Insurance

Protect your mortgage with term life insurance

Two very good reasons for purchasing term insurance instead of mortgage insurance:

​The first is the cost.

The second is the flexibility you get with term insurance.

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Let’s talk about… protecting your mortgage with term insurance

If you’re thinking that mortgage insurance from your bank has you covered, you may be surprised to learn that if something were to happen to you, your mortgage insurance would pay off your mortgage, but the money would be paid directly to the bank. While any amount owing on your mortgage at the time of your death will be paid off, your family will not receive any benefit payment. With term insurance, you own the policy, not the bank, so any death benefit payment goes to your beneficiary and they can choose to pay off any debts or use the money for something else. It’s their choice.

​Affordable protection

Simply put, term insurance is more affordable than mortgage insurance. You will often pay significantly less for term insurance than mortgage insurance for the same amount of coverage. Let’s say you need to insure your $300,000 mortgage. From a bank, you could pay 14% more than you would for a 20-year term policy for that same $300,000.

Did you know…Coverage for mortgage insurance declines as the amount owing on your mortgage declines. That’s because mortgage insurance is only covering the amount left owing on your mortgage, regardless of what amount of coverage you initially purchased. With term insurance, the coverage amount stays the same as long as the policy is in force.

​You own the policy

Another benefit of a term policy is that you own the policy, not the bank. So if a benefit is paid out, it is to your beneficiary, not to the bank. Your beneficiary will have the flexibility to use the money however they want, which can include paying down debt…or not. This money can be used for other more immediate concerns, like paying tuition and other post-secondary expenses for your children​

* For a male non-smoker age 30 buying $300,000 of coverage, mortgage insurance from one of Canada’s top 5 banks would range from $27 per month up to $39 per month. A 20-year term policy from ivari for the same $300,000 in coverage would cost $23.67 per month.

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