Mortgage life insurance is a declining life insurance contract sold by banks and credit unions at the time of signing a mortgage. In the event of the borrower’s death, it repays the remaining balance of the loan directly to the financial institution — not to your family. According to the Autorité des marchés financiers (AMF), it is in Quebec’s best interest to compare before accepting this offer. Here’s why an independent insurance broker will always recommend saying no — and which alternative to choose instead.
Protect your family, not your bank
Get independent life insurance — often 15% to 40% cheaper
Our brokers compare Desjardins, iA Financial Group, Beneva, Canada Life, Manulife and Sun Life to find you the optimal protection.
What is mortgage life insurance in Quebec?
Mortgage life insurance is a fixed-premium, decreasing life insurance product sold directly by financial institutions (Desjardins, National Bank, RBC, TD, BMO, Scotia) at the time of signing a mortgage. Its coverage decreases each month according to the balance of the loan, but the monthly premiums remain the same for the duration of the contract. The AMF points out that this product is sold by lenders, not by insurance of persons advisors, which implies different protections for the consumer.
Mortgage life insurance should not be confused with CMHC (Canada Mortgage and Housing Corporation) mortgage default insurance, which is mandatory when your down payment is less than 20% and protects the lender from default. Mortgage life insurance, on the other hand, is always optional — and it’s a product that any independent broker will advise you not to.
7 reasons to refuse your bank’s life insurance
1. A blanket that melts like snow in the sun
This is the most fundamental flaw. Your coverage decreases each month as your loan balance increases, but your monthly premium remains the same for the duration of the contract. So you’re paying more and more for less and less protection — something no independent financial advisor would recommend.
Let’s take a concrete example: you borrow $350,000 over 25 years at 5% interest. At first, your coverage is worth $350,000. After 15 years of faithful payments, you’re only left with about $170,000 in balance — but you’re still paying the same premium as on Day 1. In fact, the actual cost of your insurance per dollar of coverage doubles after 15 years. Use our mortgage calculator to see how your balance is decreasing.
With standalone term life insurance, coverage remains fixed at $350,000 for the duration of the term, regardless of your mortgage balance. Your family receives the full amount and is free to decide how it is used.
2. The beneficiary is the bank — not your family
In the event of death, the mortgage life insurance benefit is paid directly to your financial institution to repay the loan. Your spouse, your children, don’t get a penny. However, at the time of a death, a family faces much more than the mortgage payment: funeral expenses (between $5,000 and $15,000 in Quebec depending on the funeral cooperative), loss of income, consumer debts, childcare costs, children’s education.
With independent life insurance, you choose your beneficiary. Your family receives the full amount and can decide whether to pay off the mortgage, cover ongoing costs, or even keep the home while paying off the mortgage with the investment income from the capital received. According to the Financial Consumer Agency of Canada (FCAC), it’s your right to choose a life insurance policy that pays the benefit to the person of your choice.
3. No portability — switch banks, lose your insurance
In Quebec, mortgage renewals generally occur every 5 years. If you find a better rate elsewhere and decide to transfer your loan, your mortgage life insurance automatically cancels. You will need to purchase a new one from the new institution — at your current age, with a new medical assessment.
If your health has changed in the meantime (diagnosis of diabetes, heart problem, cancer), you could find yourself without insurance or with considerably higher premiums. This risk is real: according to Statistics Canada, about 44% of Canadians aged 45 to 64 live with at least one chronic condition, and 1 in 3 Canadians will experience a period of disability of 90 days or more before the age of 65.
Independent life insurance is fully portable. Change banks as many times as you want — your policy follows you, without interruption or reassessment. It is a guaranteed protection that does not depend on your banking relationship.
4. The medical examination is done after your death (post-pricing)
This is the most controversial aspect of mortgage life insurance. Unlike individual life insurance where your insurability is confirmed at the time of purchase, mortgage insurance often uses a process called “post-claim underwriting“. You fill out a short health questionnaire at the bank — often in a few minutes, between signatures. But the real medical evaluation is only done at the time of the claim, i.e. after your death.
If the insurer then discovers an omission or inaccuracy in your initial answers — even if it is unintentional — it may refuse to pay the claim. Journalistic investigations, including CBC Marketplace’s In Denial report, have documented real-life cases of Quebec and Canadian families whose mortgage life insurance claims have been denied after the death of their spouse. An expert cited in the survey, Jim Bullock (35 years of insurance experience), said that the banks’ simplified medical questionnaire is “virtually impossible to fill out correctly” for an unaccompanied consumer.
With individual life insurance purchased through a certified broker, the medical assessment is completed before the policy comes into effect. Once approved, your family can be confident that the benefit will be paid. No unpleasant surprises at the worst time. The Chamber of Insurance also regulates the advisory obligations of insurance of persons representatives in Quebec.
5. No broker, no advice — a clear conflict of interest
When your bank advisor offers you mortgage life insurance, they sell the product from their own employer. It does not compare the market. He doesn’t work for you — he works for the bank. It is a structural conflict of interest recognised by the AMF. In addition, bank advisors are often not certified professionals in insurance of persons: in Quebec, only representatives licensed by the AMF in insurance of persons are authorized to advise you adequately on these products.
An independent insurance broker, supervised by the AMF and the Chamber of Insurance, has a legal duty to advise you in your best interest. It compares offers from dozens of insurers — Desjardins Insurance, iA Financial Group, Beneva, Canada Life, Manulife, Sun Life, and others — to find the best coverage at the best price for your specific situation. This comparison service is free of charge for the consumer. Get your quote in minutes.
6. Premiums often 15% to 40% more expensive than the market
Since mortgage life insurance is sold on a non-competitive basis, premiums are typically 15% to 40% higher than equivalent term life insurance in the individual market. The bank takes advantage of the convenience of the moment: you’re in the process of signing your mortgage, you’re stressed, and adding a checkbox seems so much easier than shopping elsewhere.
Financial institutions earn significant profit margins on this product — much higher than the margins of individual life insurance. This is precisely why the selling pressure is so strong at the time of signing.
7. No flexibility or customization
Mortgage life insurance is a “one-size-fits-all” product. No choice of amount of coverage (i.e. the balance of the loan), no choice of term (i.e. amortization), no possible endorsements (disability, critical illness, waiver of premiums). Individual life insurance allows you to customize your coverage : choose an amount higher than your mortgage, add disability or critical illness coverage, provide a conversion clause to permanent insurance, and even include coverage for your spouse.
How much does mortgage life insurance cost vs term life insurance?
Here is a comparison of the approximate monthly costs for $ 350,000 coverage, based on Quebec market data (non-smoker, good health). Term life insurance premiums are based on comparative quotes from independent brokers:
| Age | Mortgage insurance (bank) | Term 20 Life Insurance (Broker) | Monthly savings | 20-year savings |
|---|---|---|---|---|
| 30 years | $30 – $40/month | $18 – $25/month | ~$15/month | ~$3,600 |
| 35 years | $35 – $45/month | $20 – $28/month | ~$16/month | ~$3,840 |
| 40 years | $50 – $70/month | $30 – $42/month | ~$24/month | ~$5,760 |
| 45 years | $75 – $100/month | $45 – $62/month | ~$34/month | ~$8,160 |
| 50 years | $110 – $150/month | $70 – $95/month | ~$48/month | ~$11,520 |
* Indicative premiums based on the 2026 Quebec market. Actual amounts vary by gender, health status and insurer. Get your personalized quote for an accurate price.
Important: These savings are calculated for a fixed coverage of $350,000 in term insurance, while mortgage insurance coverage decreases each month. The value for money of term life insurance is therefore even better than what the table suggests.
Full Comparison Chart: Mortgage Insurance vs. Individual Life Insurance
| Criterion | Mortgage insurance (bank) | Individual Life Insurance (Broker) |
|---|---|---|
| Blanket | Descending (follows the loan balance) | Fixed for the duration of the term |
| Beneficiary | The bank | Your family (your choice) |
| Portability | No — cancelled if bank change | Yes — follows you everywhere |
| Medical Assessment | After death (post-pricing) | Before issuance (certainty of payment) |
| Advisor | Bank employee | AMF certified independent broker |
| Bonuses | 15% to 40% higher | Competitive (market compared) |
| Customization | No options | Disability Riders, Critical Illness, Waiver |
| Transformation | Impossible | Convertible to permanent insurance |
| Tax-free benefit | Yes (loan repayment) | Yes (paid to your beneficiaries) |
| 25th Month Disability Protection | Definition changes: “any occupation” | Definition of “your profession” maintained |
The smart alternative: term life insurance
Term life insurance (10, 20 or 30 years) is the recommended solution for independent financial advisors and financial planning to protect a mortgage. This is the product that any serious insurance broker will recommend in place of the bank’s mortgage insurance:
Savings of $3,000 to $11,000
Premiums 15% to 40% cheaper for higher fixed coverage. Over 20 years, a 40-year-old homeowner saves an average of $5,760 with term life insurance.
Lifetime Guaranteed Protection
Pre-issuance medical evaluation. Once approved, your coverage is guaranteed — no unpleasant surprises at the time of claim. Protected by Assuris.
