Mortgage insurance
Protecting your home and your family if you die or become disabled while the mortgage runs. Bank or insurer: here is the difference, plainly.
In brief
Two products, opposite purposes
When you sign a mortgage, you are almost always offered insurance at the counter. The form is short and coverage starts right away. This is creditor insurance: the benefit pays off the balance and goes to the lender. An individual policy does the opposite: the money goes to the person you name, who can pay off the mortgage, or keep the money to live on.
How it works
The bank insures its loan; the insurer insures your family. Both aim to keep the house if the income disappears. The difference lies in who receives the money, what happens to the amount over time, and when your health is actually checked.
Watch the vocabulary: CMHC mortgage loan insurance, mandatory when the down payment is under 20%, protects the lender against default. It does not cover you if you die or become disabled.
Bank or insurer: side by side
| Criterion | Creditor insurance — the bank | Individual policy — the insurer |
|---|---|---|
| Beneficiary | The lender | The person you name |
| Amount over time | Shrinks with the balance | Level for the whole term |
| Premium over time | Usually level even as coverage drops | Level for a level amount |
| Medical review | Sometimes only at claim time | Before the policy is issued |
| Portability | Ends if you change lenders | Follows you everywhere |
| Conversion to permanent | No | Usually available |
| Setup | Immediate | A few weeks |
| Access with health issues | Often granted with little screening | May be declined or rated |
The advantages of a policy in your name
Your family decides
The money goes to the person you name. They can pay off the mortgage or keep a reserve to live on.
Coverage that does not shrink
In year fifteen, the insured amount is the same as on day one.
Covered from issue
Your insurability is confirmed before the policy is issued, not at claim time.
It follows you
Change lenders, sell, refinance: the coverage stays in place.
When the bank's insurance is still a good choice
- Health issues
- If an insurer declines or rates you, the lender's insurance may be the only coverage available. It then genuinely protects the family.
- Temporary coverage
- During the few weeks it takes to issue an individual policy. Never cancel before the new policy is issued and in force.
- Small balance, short period
- For a small remaining balance, the gap between the two may not justify full underwriting.
A concrete example
Sophie and Karim, 35 and 37, sign a $420,000 mortgage over 25 years. They are offered the lender's insurance at the counter.
With creditor insurance, a death in year 15 would pay only the remaining balance, a fraction of the amount borrowed, and nothing would go to the family. With a 25-year term policy with a level $420,000, the family would receive the same amount in year 15 as in year one, and decide for themselves what to repay.
Illustration of a mechanism, not a price projection: actual premiums depend on age, health, smoking status and the insurer.
The most important point: post-claim underwriting
In many creditor policies, the full medical review happens only when a claim is made. An inaccurate answer on the short enrolment form, even in good faith, can then lead to a denial. If you keep this coverage, keep a copy of the signed form and, when in doubt, disclose.
The right questions to ask
- If I died tomorrow, do I want the money to go to the bank or to my family?
- Was my health checked at enrolment, or will it only be checked at claim time?
- Do I lose my coverage if I change lenders at renewal?
- Is disability covered, for how long and under what definition?
The complete guide, free
Eleven criteria compared, the pros and cons of each option and six questions to decide. No sign-up or email required.
Let's talk about your mortgage
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Other protections
Sources :
- Maprime.ca mortgage insurance guide, July 2026 edition
- Standard creditor and term life contracts of Canadian insurers, reviewed in October 2026
General information: this content is not personalized advice. Guarantees, exclusions and premiums are those of the insurer's contract. Jean Carrière is not registered in mortgage brokerage: he advises on the insurance that protects the mortgage, not on financing.