Explained
Mortgage life insurance from your lender: what it costs per dollar of cover
The premium is level for the life of the policy. The benefit is your outstanding balance, which falls every month. Those two facts together decide everything about the product.
Written by Hermann Gael Nang-Song · Last reviewed August 25, 2026Founder of LoonieLodge Inc., and author of the Canadian mortgage engine this site runs on.
What creditor's group insurance is, and how it is priced
Mortgage life insurance sold at the branch — creditor's group insurance — pays out your remaining mortgage balance if you die, and often offers disability or critical-illness riders. It is offered at the time of signing, approval is usually a short questionnaire rather than a medical, and the premium is typically quoted per payment.
The premium is level: it is set from your original balance and does not fall as you pay the mortgage down. The benefit is not level: it is whatever you still owe on the day of the claim. So the amount of cover you are buying shrinks with every payment while the price of it does not, and the cost per dollar of cover rises for the whole life of the mortgage.
Two structural features are worth knowing before comparing it to anything. The beneficiary is the lender, not your family — the payout clears the mortgage rather than arriving as cash to be used as your estate decides. And the policy is generally tied to that mortgage, so refinancing or switching lenders ends it, at whatever age and health you have reached by then.
Underwriting happens at claim time, not application time
The short questionnaire at signing is what makes the product easy to buy, and it is also the thing to read carefully. Where the insurer has not underwritten the file up front, the medical history is examined when a claim is made — which is the point at which an inaccuracy on the original form, however innocent, can void the coverage.
That is not a reason for or against; it is a reason to answer the questionnaire with the same care you would give a full medical application, and to keep a copy of what you answered. Individually underwritten policies do the checking at the start instead, which is a different distribution of the same work.
The comparison people usually want is against a term life policy of the same face amount, which is level cover for a level premium and pays your named beneficiary. Whether that is better for you turns on your health, your age, your other coverage and what you want the money to do — questions for a licensed insurance advisor rather than for a mortgage calculator. What this page can do is compute the cost curve of the product you are being offered.
Worked example
Cost per $1,000 of cover, over one mortgage
A $500,000.00 mortgage at 4.50% over 25 years, with a level premium of $65.00 a payment — $780.00 a year. The benefit is the balance still owing, so it falls on the schedule.
| Year | Cover | Premiums paid | Per $1,000 / yr |
|---|---|---|---|
| Today | $500,000.00 | $0.00 | $1.56 |
| 5 years | $438,982.23 | $3,900.00 | $1.78 |
| 10 years | $362,758.63 | $7,800.00 | $2.15 |
| 15 years | $267,539.85 | $11,700.00 | $2.92 |
| 20 years | $148,592.32 | $15,600.00 | $5.25 |
The same $780.00 buys $500,000.00 of cover today and $148,592.32 at year twenty. Total premiums over the amortization come to $19,565.00, and the cost per dollar of cover ends 15.40 times what it started at. Those are the figures; whether the product is right for you is a question for a licensed insurance advisor, who can also price a level-cover alternative.
Ask three questions before signing: is the premium level while the benefit declines, who is the beneficiary, and is the medical history underwritten now or at claim time. All three are answerable at the branch, and all three change what you are buying.
Run it on your own numbers
The same arithmetic, on the figures from your own mortgage. No account, and nothing you type is stored.
Sources
Primary sources, named. Where a figure comes from a statute we cite the section, because the section is what your lender's lawyer will read.
- Financial Consumer Agency of Canada — Mortgage protection insurance
- Canadian Life and Health Insurance Association — Creditor's group insurance guidelines
Written and maintained by the author of the mortgage engine this site runs on, and reviewed against the sources named below. LOONIELODGE does not arrange mortgages, takes no commission from lenders, and nothing here is ranked or recommended because somebody paid for it.
Educational and informational only — not licensed mortgage, financial, legal or tax advice. Every lender's contract governs its own mortgage, and the figures here are estimates from stated assumptions rather than quotes. Confirm anything you intend to act on with your lender and a licensed professional.
Last reviewed August 25, 2026
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