Bank mortgage insurance is one of the worst products in Canada. Here's the math.
The mortgage broker offers you "mortgage life insurance" at signing. Premium stays the same. Benefit shrinks every month. Pays the bank, not your family. Term life is cheaper, pays more, and pays the person you choose. Why do brokers push it? Commission.
★ SIDE BY SIDE ★
Same death benefit · vastly different products
BANK MORTGAGE LIFE
Premium: FIXED at signing
Benefit: DECLINES with mortgage
Beneficiary: The bank (creditor)
Underwriting: At CLAIM time
Portable: ✗ Lost when refinancing
Multiple lives: ✗ Per person
TERM LIFE INSURANCE
Premium: FIXED for full term
Benefit: STAYS FULL amount
Beneficiary: Whoever you choose
Underwriting: At APPLICATION (certainty)
Portable: ✓ Any lender
Multiple lives: ✓ Couple discounts
★ YOUR NUMBERS ★
Plug in your mortgage
BANK MORTGAGE LIFE$38/mo
Benefit drops to $0 by year 25. 25-yr total: $11,400
TERM 25 LIFE INSURANCE$28/mo
Benefit STAYS $500,000 for full term. 25-yr total: $8,250
YOU PAY MORE WITH BANK+$3,150
For SHRINKING coverage that pays the BANK.
★ CHART · DECLINING BENEFIT ★
Where your coverage goes
Term Life · Stays $500,000 flat Bank Mortgage Life · Drops with balance
★ WHY BROKERS PUSH IT ★
The commission trail
30-40%Commission to broker
Mortgage broker often earns 30-40% of first year premiums as commission. Selling you mortgage life nets them more than the mortgage itself.
5 mins"Yes/No" application
No medical exam at signing. Just a 5-question form. Feels easy. But the bank reserves the right to underwrite AT THE CLAIM — meaning they can deny later.
~50%Claim denial rate
Industry estimates suggest 30-50% of mortgage life claims get denied due to undisclosed pre-existing conditions. Term life: <2% denial after the 2-year contestability period.
★ THE BETTER MOVE ★
Decline at signing · buy term separately
Decline the mortgage life pitch at signing. "No thanks, I have term life through [provider]."
Apply for term life that matches your mortgage. Same coverage amount, same term length (25-30 yr).
Name your spouse / family as beneficiary. Not the bank. They decide what to do with the payout.
Refinance freely. Your insurance moves with you, not the lender.
One application, full underwriting upfront, predictable cost, full benefit, family-controlled payout. The mortgage broker won't love this answer — but the math does.