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Mortgage Life Insurance

Mortgage Life Insurance is an industry term used to describe any insurance policy that protects your mortgage. When insuring your life to protect your mortgage, you have a number of options available from specific types of insurance products. The most common types of insurance policies used to protect a mortgage are term life, creditor insurance and declining life insurance. When making your decision, it's important to select the type of life insurance policy that's right for you.

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Term Life Insurance

Term Life Insurance is generally the best choice over the other two common types of mortgage life insurance products. When issued by an independent life insurance broker, a Term Life Insurance policy is structured so that the insured person can select a beneficiary that is not the bank or lender. The monetary value (called the face value) of this policy remains constant and doesn't decline with the mortgage balance, so the beneficiary would receive the full face value of the policy to use as deemed appropriate.

Term Life Insurance typically costs less than Creditor Insurance and is available in terms between 5 and 40 years. These policies are typically renewable, which means that you have the option to renew the policy regardless of any changes in your health. Term Life Insurance is also the most flexible option because policies are convertible to permanent insurance. Meaning that at any point you may convert your term life insurance to a T100, Whole Life or a Universal Life policy. Because Term Life Insurance is underwritten specific to the person insured, it is also completely portable should you change mortgage lenders or move.

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Declining Life Insurance

Depending on the company you choose, declining life insurance can be a less expensive alternative to Term Life insurance. This is possible because the face value of the policy decreases with time. Typically, the value of the death benefit decreases with the size of your mortgage principal. Like term, this policy lets the holder choose the beneficiary, which means that declining life insurance policies are portable if you wish to change lenders or one day move.

Creditor Insurance

Creditor Insurance is the traditional method home owners have been using to protect their mortgages. Creditor insurance is based on larger, more general demographics, so individual health and habits have less bearing on the policy. As a result, Creditor life insurance is generally more expensive than Term Life insurance. Also, unlike Term and Declining Life insurance policies, the policy holder cannot choose the beneficiary of the policy, as the beneficiary is strictly set to the lender or bank responsible for the mortgage. Because of this, creditor insurance is not a portable form of life insurance. For these reasons, creditor insurance is quickly becoming regarded as an outdated means of protecting a mortgage. Insurance brokers, financial planners and financial firms try to emphasise the value of term and declining life insurance over creditor insurance.

The three major choices available for Canadians to protect their mortgages are term life, declining life and creditor insurance. Term life is the most flexible, best recommended product for protecting a mortgage. It's portable, has fixed premiums over its term and is convertible and renewable. Declining life insurance is often the least expensive form of mortgage life insurance. It has a decreasing face value, which makes it less expensive to provide. Finally, there's creditor insurance, which is the traditional, but most expensive and least flexible form of mortgage life insurance. When choosing the right policy for protecting your mortgage, we highly recommend consulting your financial planner or an insurance broker.


Our CanEquity Insurance professionals can help you decide what insurance policy will best meet your needs. CanEquity Insurance is an independent brokerage of life insurance and other financial products and services. CanEquity has access to all of the insurance companies in Canada, so we can offer you a free quote on all of these products to help you make an informed decision. With CanEquity, you are receiving the best price and product available in Canada!

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