5 Questions to Ask Before Buying Mortgage Life Insurance

1. "Who is the beneficiary?"

This is the most important question most people never ask. With bank mortgage life insurance, the bank is the beneficiary , not your family.

If you die, the payout goes directly to the bank to pay off your mortgage. Your spouse doesn't get a choice. They can't use that money for living expenses, your kids' education, or anything else.

With independent term life insurance, your family is the beneficiary. They receive the full payout and decide what to do with it. They might pay off the mortgage, or they might invest it, cover living expenses, or keep the house and the cash.

2. "Does my coverage stay the same or decline?"

Bank mortgage life insurance is "declining balance" coverage. As you pay down your mortgage, your coverage shrinks, but your premium stays exactly the same.

Year 1: You owe $500,000, you're covered for $500,000.
Year 10: You owe $350,000, you're covered for $350,000.
Year 19: You owe $50,000, you're covered for $50,000.

Same premium. Shrinking protection. That's a bad deal that gets worse over time.

Independent term life insurance is "level coverage." Your $500,000 policy stays $500,000 for the entire 20-year term. As your mortgage shrinks, the gap becomes extra protection for your family.

3. "When does underwriting happen?"

Here's where it gets scary.

Bank mortgage insurance uses "post-claim underwriting." They ask you a few health questions when you sign up, but they don't actually verify anything. The real underwriting happens after you die, when your family files a claim.

If the bank's review finds any discrepancy, something you forgot, misunderstood, or didn't think was relevant, they can deny the claim. Your family gets nothing.

Independent term life insurance is fully underwritten upfront. You might need a medical exam, blood work, and detailed health history. It's more work, but once you're approved, your policy is locked in. Claims can't be denied later.

4. "What happens if I switch banks or pay off early?"

Bank mortgage insurance is tied to your mortgage. If you refinance with another lender, move, or pay off your mortgage early, you lose your coverage.

And here's the problem: you're now older, possibly with new health issues, trying to get new coverage. Premiums will be higher. You might not qualify at all.

Independent term life insurance is portable. It's yours, regardless of your mortgage situation. Switch banks, pay off early, move across the country, your coverage stays the same.

5. "How much am I actually paying over 20 years?"

Banks quote monthly premiums. But let's look at the full picture for a 35-year-old non-smoker with a $500,000 mortgage:

Potential savings: $10,000 to $13,000+, for coverage that's actually better.

The Bottom Line

Bank mortgage life insurance is convenient. It's easy to sign up. But convenience has a cost, literally thousands of dollars, plus coverage that declines, benefits that go to the bank, and claims that can be denied.

Before you check that box, get a quote for independent term life insurance. Talk to a licensed broker (not your bank). Compare the numbers.

For most healthy Canadians, independent term life is the clear winner.