The bank’s mortgage insurance: what they don’t tell you, and why you can replace it
When you sign the mortgage, the bank offers its insurance. It is convenient, it is legal, and it is almost always the wrong product for you. Six differences that matter, the real rates of individual insurance in 2026, and the steps to switch without risk.
The mortgage insurance the bank offers is not a scam. It is group insurance, designed to be sold in thirty seconds at signing, by someone whose job is not insurance. It protects the lender first. Here, point by point, is how it differs from an individual life insurance policy that you own yourself, and what that costs.
Six differences that matter
1. The beneficiary is the bank
If you die, the bank’s insurance pays off the loan balance, to the bank. Your family keeps the house free of the mortgage, and nothing else. With individual insurance, the benefit is paid to the person you named, who decides: pay off the mortgage, keep it because the rate is good and invest the money, pay for the children’s education, take some time. It is the difference between a debt erased and a choice.
2. The coverage shrinks, the premium doesn’t
The bank’s insurance covers the loan balance, which goes down every month. The premium, however, is set at the start on the initial amount and does not go down. After fifteen years, you are paying the same amount to cover half the debt. Individual insurance covers a fixed amount for the whole term: $300,000 in the first year, $300,000 in the twenty-fifth.
3. Your health is checked… when the claim is made
This is the least-known point. The bank’s insurance generally asks a few summary questions at signing and checks the medical file in detail only when a death occurs. An answer judged inaccurate at that point can get the claim denied, after years of premiums. Individual insurance does the opposite: underwriting happens at the start, and once the policy is issued, it can no longer be contested on grounds of health after two years.
4. It disappears if you change banks
Renewing elsewhere for a better rate, selling and buying again, refinancing: each time, the bank’s insurance stops and you have to take out a new one, at the price of your new age and your health at that moment. Individual insurance follows you: it has nothing to do with the loan.
5. The amount is the loan’s, not your family’s
The right question is not “how much is left on the mortgage” but “how much will my family need”. Often more: an income to replace, education, debts. Sometimes less: if your spouse can carry the loan alone. Individual insurance is sized to fit; the bank’s is not.
6. The price
There is no universal rule, but the bank’s insurance is priced by broad age bands, with no distinction for sex or state of health, and it faces no competition. Individual insurance is priced on your file, by insurers fighting for the same client. The figures below give the market floor; ask your bank for the monthly cost of its loan insurance for the same amount and compare.
The real rates of individual insurance
Lowest monthly premium in our survey of October 30, 2026 for 25-year term life insurance, the product most often used to cover a mortgage: a fixed amount for 25 years, paid to your loved ones. Healthy non-smoker.
| Age | $300,000, woman | $300,000, man | $500,000, woman | $500,000, man |
|---|---|---|---|---|
| Age 30 | $19.17 | $25.29 | $27.00 | $36.90 |
| Age 35 | $22.95 | $30.24 | $31.50 | $42.30 |
| Age 40 | $31.86 | $42.93 | $46.80 | $62.55 |
| Age 45 | $50.94 | $67.50 | $73.80 | $103.50 |
| Age 50 | $81.18 | $111.15 | $121.50 | $166.95 |
WinQuote survey, 25-year term, standard class, non-smoker. Full table from $200,000 to $750,000 on the mortgage insurance page.
For a couple, two individual policies or one joint first-to-die policy cover both spouses; the joint policy costs less than two policies but pays out only once. It is a calculation the advisor works through with you, depending on who earns what.
How to switch without ever being left uncovered
- Ask the bank for its price for your balance and your age, and the price of an individual term policy for the same amount. Compare at equal coverage.
- Apply for the individual insurance first. A few health questions, sometimes a blood sample taken at home, two to four weeks’ wait.
- Wait until the policy is in force, first premium paid, contract received.
- Then cancel the bank’s insurance in writing. No penalty; the premium stops the following month.
The order matters: cancelling before you are accepted elsewhere means risking a gap in coverage, or worse, discovering a refusal with no safety net. An advisor coordinates the two steps.
What the bank does well
In fairness: the bank’s insurance accepts almost everyone within minutes, with no exam. For someone whose health would close the door to individual insurance, it may be the only protection available, and in that case it is better than nothing. That is precisely what an advisor checks before advising you to switch: if standard underwriting or simplified issue is open to you, as it is to the vast majority of people, the individual policy wins on all six points.
Going further
The rates by amount and by age are on the mortgage insurance page, where the difference with CMHC insurance is explained, and our term or permanent guide helps you choose the term. The advisor who calls you back is certified by the AMF and does not work for a bank.