Mortgage insurance vs life insurance in Canada: what's the difference?
What is the difference between mortgage insurance and life insurance?
Mortgage insurance pays your remaining mortgage balance to the lender if you die. Term life insurance is a policy you own: it pays a fixed amount to your beneficiaries, and they decide whether to pay off the mortgage or use the money another way.
Lender mortgage insurance goes by several names: mortgage life insurance, mortgage protection insurance, bank mortgage insurance, or creditor insurance, which is the industry's term for insurance sold through a lender or broker to cover a debt. If you got your mortgage through a broker, you may have been offered it as Manulife's Mortgage Protection Plan (MPP), a plan many Canadian mortgage brokers offer. They all work the same basic way: the lender is paid, and the payout follows your balance down.
The Financial Consumer Agency of Canada (FCAC), the federal regulator for consumer banking, is direct about who benefits:
"The mortgage lender is the beneficiary of any mortgage life insurance policy." Term or permanent life insurance "may provide better value," because its death benefit stays level and beneficiaries can use it for any purpose.
— Financial Consumer Agency of Canada, Optional mortgage insurance products
Is mortgage life insurance the same as CMHC mortgage default insurance?
No. Mortgage default insurance (from CMHC, Sagen or Canada Guaranty) is required when your down payment is under 20%, and it protects the lender if you stop making payments. It pays nothing to you or your family. Mortgage life insurance is optional and pays the lender if you die.
Who gets paid if a borrower dies?
With lender mortgage insurance, the money goes to the lender to pay down what you owe. With your own life insurance, it goes to the people you name, such as your spouse or a co-borrower, and they choose how to use it: pay off the home, keep the mortgage and cover living costs, or save for school.
Haven's October 2026 premium comparison shows what that means on a $1,000,000 mortgage if a borrower dies in year 15 (assumptions are listed under the tables below):
| Lender mortgage insurance | Your own term life policy | |
|---|---|---|
| Death benefit paid out | $678,839 | $1,000,000 |
| Death benefit paid to | The mortgage lender | Your beneficiary or surviving borrower |
| What the family gets beyond the paid-off mortgage | Nothing | $321,161 to spare, or the full amount if they keep the mortgage |
Does mortgage insurance coverage go down over time?
Yes. Lender mortgage insurance follows your mortgage balance, so the payout gets smaller every year while your premium usually stays the same. A term life policy stays level: the same coverage and the same premium for the whole term.
Haven's 2026 comparison: one borrower, $1,000,000 mortgage
| Lender mortgage insurance | Term life insurance | |||
|---|---|---|---|---|
| Year | Monthly premium | Death benefit | Monthly premium | Death benefit |
| 1 | $109.83 | $985,246 | $72.45 | $1,000,000 |
| 5 | $109.83 | $918,287 | $72.45 | $1,000,000 |
| 10 | $109.83 | $813,421 | $72.45 | $1,000,000 |
| 15 | $109.83 | $678,839 | $72.45 | $1,000,000 |
| 20 | $109.83 | $506,123 | $72.45 | $1,000,000 |
| 25 | $109.83 | $284,466 | $72.45 | $1,000,000 |
| 30 | $109.83 | $0 | $72.45 | $1,000,000 |
Which costs more, lender mortgage insurance or term life insurance?
Term life insurance often costs less than lender mortgage insurance. In Haven's October 2026 premium comparison, term life was $72.45 a month instead of $109.83 for one borrower, and $147.54 instead of $159.02 for two. Over 30 years that's $26,082 instead of $39,539 for one borrower. Your own price depends on your age, health, smoking status and coverage amount.
| Total premiums paid | Lender mortgage insurance | Term life insurance |
|---|---|---|
| One borrower, by year 15 | $19,769 | $13,041 |
| One borrower, over 30 years | $39,539 | $26,082 |
| Two borrowers, by year 15 | $28,624 | $26,557 |
| Two borrowers, over 30 years | $57,247 | $53,114 |
Source: Haven premium comparison, October 2026. Illustrative only. One borrower: a 34-year-old female non-smoker. Two borrowers: a 34-year-old female non-smoker and a 31-year-old male non-smoker. All in British Columbia, $1,000,000 mortgage, 30-year amortization, 5% interest (monthly payment $5,368.22). Lender insurance coverage is the scheduled mortgage balance at the end of each year. Premiums estimated from actual quotes, as of October 2026.
What happens on joint coverage if one borrower dies?
With joint lender mortgage insurance, the remaining mortgage balance is paid to the lender once, and coverage then ends for both borrowers. With a joint life policy, the full coverage amount is paid to the surviving borrower once, and coverage then ends. In both cases the survivor needs new coverage, but with life insurance they also have the money.
Can I keep my coverage if I switch lenders or sell my home?
A term life policy isn't tied to your home or your mortgage. Move, sell, refinance or switch lenders, and your coverage and premium stay the same. Lender mortgage insurance is tied to having a mortgage: some plans end if you change lenders, and even plans that can move with you end if you sell without taking a new mortgage.
Is the price I'm quoted the price I'll pay?
With your own life insurance, underwriting is done before the policy is issued, so you know your exact price and approval before you rely on it. With many lender plans, coverage can start right away, but the final premium and coverage are set after underwriting, and the approved price can be higher than the quote.
Some lender plans also limit coverage if a follow-up phone interview isn't completed in time: with some, if it isn't done within 30 days, you're only covered for death or disability caused by an accident.
What happens to my coverage when I pay off my mortgage?
Lender mortgage insurance ends when the mortgage does. With some plans, premiums keep coming out until you tell them to stop. A term life policy stays in place for its full term, whether or not you still have a mortgage.
Is there an age limit?
Many lender plans only accept applicants up to their mid-60s, and coverage often ends around age 70, however much mortgage is left. Depending on the product and your health, individual life insurance can be available up to age 85, with some options lasting to age 100. Premiums at older ages are higher.
Does it cover disability or critical illness?
Some lender plans include disability coverage, but it usually covers only your mortgage payment, for a limited time, and critical illness is generally not included. With individual coverage there are more options, including disability insurance that replaces income and critical illness insurance that pays a tax-free lump sum.
How much coverage can I get?
Many lender plans cap coverage at around $1 million, and the payout never exceeds what you owe, even with two people insured and paying. Individual life insurance can go well into the millions, based on your income, assets and needs, so it can protect more than the mortgage.
I already have mortgage insurance. Should I cancel it?
Don't cancel it until your new coverage is approved and in force. Otherwise you could be left uninsured while you apply elsewhere. A licensed advisor can compare what you have with your options and time the switch so there's no gap.
At a glance
| Question | Lender mortgage insurance (creditor insurance) | Your own term life insurance policy |
|---|---|---|
| Who gets the money? | The lender | Whoever you choose |
| Coverage over time | Goes down with your balance | Stays level |
| Premium over time | Usually stays the same | Stays the same for the term |
| Change lenders or sell | May end | Stays with you |
| Price certainty | Can change after underwriting | Set before the policy is issued |
| Typical maximum | Around $1 million, never more than you owe | Can be several million |