When you close on a home in Canada, your lender will almost certainly offer you mortgage protection insurance. You should almost certainly look elsewhere.
That is not a reflexive criticism of banks. It is an observation about how bank-sold mortgage insurance is structured, and how that structure affects you at the moment it matters most.
How bank mortgage insurance works
The lender’s product — sometimes called creditor insurance — is tied to your mortgage. The benefit decreases as your mortgage balance decreases. The premium, however, typically does not. You pay the same amount in year one, when the benefit is $600,000, as in year twenty-five, when it might be $80,000.
More importantly: the bank is the beneficiary, not your family. If you die with $300,000 remaining on your mortgage, the lender receives $300,000 and your mortgage is discharged. Your family receives nothing beyond the equity they already had. If your family’s financial situation has changed — if a spouse has also lost income, if there are debts beyond the mortgage — the insurance pays the bank and stops there.
There is also a practice called post-claim underwriting. With many creditor insurance products, the insurer does not fully review your medical history when you apply. They review it when you make a claim. If they find a condition you did not disclose — or did not know to disclose — at the time of application, they can deny the claim. You paid premiums for years under the assumption you were covered. The denial comes at the worst possible moment.
How independent mortgage protection works
When we place mortgage protection coverage through a Canadian carrier, the policy is owned by you, not the lender. The benefit is paid to your family — not the bank — as a tax-free lump sum. They decide how to use it: pay off the mortgage, invest it, replace lost income, or some combination.
The coverage amount is fixed at the time of application and does not decrease as you pay down the mortgage. Medical underwriting happens at the time of application, so there are no post-claim surprises.
If you move, refinance, or switch lenders, the policy travels with you. You do not start over.
What mortgage protection can cover
Beyond a death benefit, a well-structured mortgage protection plan can include:
- Disability coverage: monthly benefit payments if you cannot work due to illness or injury
- Critical illness: a lump-sum payment if you are diagnosed with a covered condition (heart attack, stroke, cancer, and others)
- Job loss: some plans include a short-term benefit for involuntary unemployment
Not every client needs all of these layers. We look at what existing coverage — group benefits, disability insurance, savings — is already in place, and build around the gaps.
The timing question
Mortgage protection is easiest to arrange at the time of purchase, when your health is typically well-documented and the lender’s offer is fresh in your mind. It can be arranged at any point during a mortgage term, but rates are age-dependent, and waiting costs money.
If you closed on a home in the last twelve months and accepted the bank’s coverage at signing, it is worth a review. In most cases, we can match or improve the coverage at a lower total cost.