How Much Does Mortgage Life Insurance Cost in Canada?

How Much Does Mortgage Life Insurance Cost in Canada?

Many Canadians might wonder how much does mortgage life insurance cost in Canada. After obtaining a mortgage, many Canadians worry about what would happen if something unexpected happens to them before they pay it off.

For this reason, many Canadians take mortgage life insurance to provide financial security and peace of mind.

Mortgage life insurance in Canada costs a 35-year-old male $74 monthly on average for coverage between $200,000 to $800,000. Factors such as age, health, smoking history, and the size of the mortgage would determine the actual price of the policy.

Premiums rise as both the age of the borrower and the quantity of the mortgage debt increase.

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This comprehensive guide will answer the question of how much does mortgage life insurance cost in Canada.

We’ll explain what mortgage life insurance is, how it works, and also explore its benefits. Further into the guide, we will look at how it differs from regular life insurance and top providers in Canada.

How much does mortgage life insurance cost in Canada?

Mortgage life insurance premiums are based on personalized factors like age, health, gender, smoking status, mortgage amount, and amortization period. Here’s a comparison of average monthly mortgage life insurance costs with TD, CIBC, and Scotia in Canada for $500,000 coverage:

Age BracketTD Mortgage Life InsuranceCIBC Mortgage Life InsuranceScotiabank Mortgage Life Insurance
18-30 years old$50$40$70
31-40 years old$100$80$140
41-50 years old$200$160$280
51-65 years old$400$320$560
66-69 years old$830$810$785

The best way to estimate your specific premium is to get an online quote directly from a mortgage insurer. After entering a few details, you can view instant pricing tailored to your situation. 

Factors that affect the cost of mortgage life insurance in Canada

Looking into how much does mortgage life insurance cost in Canada, premiums for mortgage protection insurance vary depending on factors like:

Type of mortgage life insurance policy

The type of mortgage life insurance policy is a crucial cost factor. Decreasing-term policies have lower premiums than level-term policies for the same coverage amount. With decreasing terms, the death benefit declines over time to match the mortgage balance.

On the other hand, the level-term mortgage life insurance policy maintains the full death benefit for the duration. The insurer’s risk decreases with decreasing term policies. Premiums are approximately 40% lower compared to level terms.

Decreasing term is ideal for most mortgage holders since it aligns with the debt.

Age

Age significantly impacts mortgage life insurance rates. Premiums start low for younger applicants between 18 and 45 years old who are considered lower risk by insurers. Rates increase with age as health risks rise.

A 25-year-old may pay 10 cents monthly for every $1000, while a 60-year-old pays $1 for the same coverage. Insurers’ price policies depend on the expected probability of a claim. The older the insured, the greater the chance of dying during the term.

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Gender

Women generally have lower mortgage life insurance rates than men. On average, females pay 20-25% less than males for the same policy at the same age. Statistics show women live longer and have lower mortality rates at most ages. Gender is a factor insurers use to assess risk levels and probability of claims.

For example, a 30-year-old non-smoking male could expect to pay approximately $28 per month to get $450,000 of coverage for 20 years from PolicyMe. A 30-year-old female non-smoker could expect to pay around $20 monthly for the same coverage.

Health

Applicants with existing medical conditions or chronic illnesses can expect to pay higher premiums for mortgage life insurance. Conditions like cancer, diabetes, heart disease and stroke can increase rates by 50% or more compared to healthy individuals.

Most policies require a medical exam. Insurers charge higher premiums to those deemed higher risk. Disclosing health issues prevents claim denial. Those in good health get lower premiums.

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Smoking status

Smokers pay significantly higher premiums than non-smokers, often 50% more. Statistics clearly show substantially higher mortality rates for smokers. Nicotine tests can be required to verify status.

But premiums reduce after quitting for 1 to 2 years as health improves. Being a non-smoker is one of the most significant ways to lower mortgage life insurance costs.

Mortgage amount

The amount of mortgage life insurance coverage directly impacts the premiums. Policies are purchased to cover all or part of the mortgage balance. The higher the mortgage, the higher the required coverage and the higher the premiums.

For example, $500,000 of coverage costs approximately twice as much as $250,000 of coverage for the same applicant and term. Insurers’ prices are based on the total death benefit payout they would be responsible for.

Term length

Longer policy terms equate to higher total premiums than shorter terms when all other factors are equal. A 20-year term will have higher premiums than a 10-year term for the same coverage and applicant. The insurer is exposed to risk for extended periods, so it charges more.

However, longer terms may have lower annual premiums because the cost is spread out. The total lifetime premium cost is still higher for the longer term, though.

Insurer

Mortgage life insurance rates can vary between insurers. Larger companies may offer lower rates due to economies of scale. Smaller niche players compete through specialized products.

Big banks can have higher premiums but offer the convenience of bundling with mortgages. Comparing quotes from multiple insurers can help find lower rates for the same coverage. Some insurers also provide discounts of 15-20% if both spouses are insured.

Why does mortgage life insurance come at a steep price?

Unlike traditional life insurance, which is underwritten upfront, mortgage protection policies banks often undergo underwriting after a claim is made. This means the insurer doesn’t assess your individual health and lifestyle risks beforehand; instead, it assumes all applicants represent the same level of risk.

Whether you’re a smoker with health issues or a healthy athlete, you pay the same mortgage life insurance rates. The insurer doesn’t award lower premiums for those maintaining wellness and managing conditions. They evaluate health retroactively once a claim is filed.

This approach allows lenders to offer streamlined coverage without medical exams but results in inflated pricing. You overpay to subsidize the increased risks of other policyholders. For most homeowners, basic term life insurance that underwrites applicants individually first provides better rates.

How to find cheap mortgage life insurance policies in Canada

While it is convenient to purchase mortgage insurance through your lender, you can often find cheaper rates by shopping around with life insurance companies.

Now that we’ve answered the question of how much does mortgage life insurance cost in Canada, let’s explore how to secure affordable mortgage coverage.

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Buy early to lock in savings

One of the most significant factors in securing budget-friendly premiums is purchasing life insurance when young and healthy. Every year that goes by, rates creep higher, particularly after age 50. Buying early means paying less over your lifetime despite small incremental increases.

You can set yourself up for success by getting covered in your 20s and 30s before conditions arise that could impact insurability.

Compare quotes to find the best rates

Rather than going with the first policy you find, get quotes from at least 5 major insurance companies. This allows you to compare rates and find the most competitive pricing. Insurers assess risk differently, so premiums vary.

An independent broker like PolicyAdvisor.com can quickly provide multiple quotes, eliminating the legwork of contacting individual carriers.

Consider term life insurance for affordability

For most people, term life insurance offers the best value, covering you for a set period – 10, 20, or 30 years versus permanent insurance that lasts your whole life.

It provides essential protection if you pass away prematurely without overpaying for lifelong coverage. Consider converting a term policy to permanent insurance later in life when rates would be prohibitive.

Optimize your policy with discounts and bundling

Check if insurers offer multi-policy or multi-applicant discounts. Bundling your life insurance with home, auto, or other policies may lower premiums.

Some carriers also provide discounts if you and your spouse apply together. PolicyMe offers Combined policies that allow couples to apply jointly and provide opportunities to save.

Maintain health for potential savings

Your health directly correlates to life insurance rates, so maintaining wellness can reduce costs. Keep weight within a healthy range, exercise, don’t smoke, and avoid hazardous hobbies. For most applicants, a medical exam leads to better pricing than no-exam policies.

Letting the insurer assess your health provides options for lower-cost coverage.

Customize coverage to your needs

Work with your insurance agent to customize policy length and benefits to your situation. You may not need as large of a death benefit later in life or a lengthy 30-year term. Adjusting coverage as needs change prevents overpaying.

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Mortgage life insurance providers in Canada

To answer the question of how much does mortgage life insurance cost in Canada, we must compare what the top providers offer. When exploring options to protect your home and family, you have choices between direct lender-tied policies and coverage from standalone insurers. Here are the top providers in Canada:

CIBC Mortgage Life Insurance

Like other major banks, CIBC conveniently allows you to add mortgage life insurance when financing your home purchase through them. Eligible borrowers can secure coverage up to $750,000 to pay off a remaining mortgage balance if the unexpected occurs. But how much does mortgage life insurance cost in Canada in CIBC?

The average cost per month for $1000 in coverage is between $.08 and $1.62. How old you were when you first insured your mortgage will determine this, as will the number of co-borrowers on the policy. Costs start lower for younger buyers and gradually rise as you age.

Payments are automatically deducted alongside your mortgage bill for simplified administration. CIBC will adjust premiums if you change your mortgage payment frequency.

TD Mortgage Life Insurance

Canadian giant TD makes it easy to add mortgage life insurance to a home purchase or refinance. Mortgage holders can secure up to $500,000 to cover an outstanding principal loan balance. So, how much does mortgage life insurance cost in Canada for TD?

For policyholders between 18 and 30, the lowest monthly premiums amount to just $0.10 per $1,000 in coverage. The rates increase gradually with age, reaching $1.66 per $1,000 for Canadians aged 66 to 69. The rates you lock in remain steady over your mortgage term.

TD also provides the option to supplement basic mortgage insurance with critical illness insurance up to $500,000. This additional coverage provides crucial funds if diagnosed with a significant covered condition during your mortgage.

Scotia Mortgage Protection Insurance

Scotiabank allows mortgage customers the convenience of adding integrated life insurance when financing a home loan through them. Canadians can get coverage up to $1,000,000 to cover their remaining mortgage balance. How much does mortgage life insurance cost in Canada at Scotia Bank?

Monthly fees start at $0.14 per $1,000 for borrowers up to 30 years old and rise to $1.57 for those above 66. All rates lock in for the mortgage duration. Critical illness and disability policies can supplement enhanced financial security.

BMO Mortgage Protection Insurance

BMO is one of Canada’s big five banks, providing the option for mortgage holders to add mortgage life insurance when financing through them.

You can select covering 50% to 100% of your total mortgage principal amount, up to the $600,000 maximum. Choosing a lower percentage still provides financial protection while optimizing costs.

To answer the question of how much does mortgage life insurance cost in Canada, BMO offers online quotes by inputting a few basic details. These include age, gender, smoker status, and mortgage amount. Monthly premiums are displayed in under a minute for easy budgeting.

PolicyMe Mortgage Life Insurance

PolicyMe makes buying mortgage insurance online in Canada fast and easy, without paperwork or medical tests. They offer near-instant pricing quotes and acceptance in under 5 minutes with a simplified application process. No lengthy health questionnaires or exams are required.

Ideal for busy families, PolicyMe offers mortgage protection coverage ranging from $100,000 to policies of up to $1 million.

Available terms span 10 to 30-year periods, allowing you to match the length of your mortgage. Customers from 30 to 40 frequently select a 20-year term with approximately $500,000 in total coverage for mortgage life insurance with PolicyMe.

So, how much does mortgage life insurance cost in Canada with PolicyMe? Based on age, gender, smoker status, and mortgage principal insured, typical middle-aged buyers pay $25 to $78 monthly.

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How to determine how much mortgage life insurance I need

When getting mortgage life insurance, one of the most critical factors is deciding on the right amount of coverage. In this section on how much does mortgage life insurance cost in Canada, we will look at some of these factors. Here are some key considerations when determining how much you need:

  • Outstanding Mortgage Balance: At a minimum, your coverage should equal your remaining mortgage principal. This ensures your family can repay the entire loan if you pass away prematurely. Be sure to check your mortgage statement for the current principal balance.
  • Other Debts: In addition to the mortgage, list all other debts like credit cards, car loans, HELOCs, student loans, etc. Add up all of these balances and include them in your coverage calculation. You want your family to have a clean financial slate.
  • Future Mortgage Payments: For extra protection, add coverage equivalent to 2-5 years of upcoming mortgage payments. This provides a buffer for housing expenses while your beneficiaries get back on their feet.
  • Family Income Replacement: If others depend on your income, determine how many years of future earnings you want to replace. Add enough coverage to generate that ongoing income for your dependents.
  • Final Expenses: The policy should cover predictable end-of-life costs like funeral fees, probate, taxes, medical bills, etc. Budget around $15,000-20,000 for these expenses.
  • Financial Obligations: Consider upcoming major costs like college tuition, eldercare, or business investments you’ve pledged to support. The policy proceeds can help fund these.

A detailed overview of all your financial obligations and future needs will help you land on the right mortgage life insurance coverage amount. When making your estimate, it is best to aim high, as you can always reduce it later if needed.

Tips for determining coverage

  • Get a detailed list of all your debts, assets, income, and financial obligations.
  • Use an online calculator to estimate needed coverage based on your specific situation.
  • Work with a financial advisor or mortgage broker to determine an appropriate amount.
  • Remember to adjust the coverage as your mortgage balance decreases or your financial situation changes.
  • It’s better to err on the higher side when in doubt. You can always decrease later if needed.

Following these guidelines will help ensure your mortgage life insurance coverage is sufficient to provide for your financial dependents and handle outstanding debts.

The benefits of mortgage life insurance

With an idea of how much does mortgage life insurance cost in Canada, let’s explore the benefits. There are several advantages to mortgage protection coverage beyond just paying off your home loan:

  • Avoid Foreclosure: The payout from mortgage life insurance goes directly to paying off your remaining mortgage principal. This prevents your family from defaulting on the loan or facing foreclosure. Your beneficiaries won’t be forced to sell the family home to repay the mortgage.
  • Lock In At A Young Age: Getting mortgage life insurance when you are young allows you to lock in low premium rates based on your age when you first purchased the policy. Those premiums remain constant over the policy term.
  • Tax-Free Proceeds: Payouts from mortgage insurance go directly from the insurer to the lender. Your beneficiaries do not receive the money, which is not taxable.
  • Customizable: You can customize your mortgage protection policy amount, terms, and schedule to match the details of your specific home loan precisely. This ensures the payout fully covers the remaining principal.
  • Less Medical Underwriting: Simplified application process with fewer health questions than individual life insurance. Guaranteed acceptance makes it easy to get mortgage insurance when you’re young and healthy.
  • Affordable: Group rates negotiated through lenders help keep mortgage protection insurance premiums affordable compared to individual life insurance policies.
  • Flexible Payment Options: Insurers offer flexible mortgage insurance premium payment options, including monthly deductions, annual payments, or a single lump sum payment for the entire policy period.
  • Portable: If you move, your mortgage life insurance policy and its favourable locked-in rates can transfer to cover your new home.
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Conclusion

How much does mortgage life insurance cost in Canada? It depends on what your mortgage costs, your age, and your health. You can get premiums between $25 to $150 monthly to get invaluable protection.

While it is not mandatory in Canada if you have a mortgage and people who count on your income, getting it is necessary. You should still consider mortgage life insurance if you have health problems that make it hard to get affordable term insurance.

It’s essential to learn about your public rights and responsibilities when taking mortgage life insurance in Canada.

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FAQs about how much does mortgage life insurance cost in Canada

How much mortgage protection insurance should I get?

You generally want to match your coverage amount to your total mortgage balance to fully cover the outstanding amount owing at the time of death. This ensures your family keeps the home without any remaining mortgage payments.

When does mortgage insurance coverage expire?

Mortgage life insurance coverage expires as soon as you pay off your mortgage in full or if you sell the home before the end of the policy term. It is not lifelong coverage but protects you for the amortization period of your mortgage.

Is mortgage insurance cheaper than life insurance?

Yes, mortgage protection insurance is generally cheaper than individually purchased life insurance policies. Monthly premiums for mortgage insurance are often $25 to $100 per person insured. Comparable individual life insurance may cost two to three times more.

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November 14, 2023
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