Fraud Blocker

Mortgage Insurance Vs. Life Insurance: What You Need To Know

Family standing outside of house smiling.
August 27, 2023


If you’ve purchased a house recently, you’ve most likely been offered mortgage insurance by your mortgage lender or broker. Although the idea of protecting the biggest investment you’ll ever make is one we stand behind, it doesn’t mean mortgage insurance is always necessary. This is especially true if you’re covered by another policy, such as life insurance.

How does mortgage vs. life insurance work? Well, mortgage insurance ensures that if something were to happen, the amount remaining on your mortgage would be paid off. This payment goes directly to your lender and cannot be used for anything else.

In contrast, life insurance pays a non-taxable lump sum to your beneficiary if something unimaginable were to happen to you– the policy owner. This money can be used to cover expenses such as your mortgage or anything the beneficiary chooses.

In this article, we’ll explore how mortgage and life insurance policies differ and which one may work best for your unique situation. Our goal is to ensure your investment is properly protected without you having to spend any more than you need to on insurance.

Prefer to skip the reading and jump right to speaking to one of our insurance consultants? Go ahead and reach out!

Jump Straight To The Info You Want Most!

What Is Mortgage Insurance?

Mortgage insurance is insurance you purchase from the financial institution that carries your mortgage. Its sole purpose is to ensure the outstanding debt you owe would be paid out if you were to pass away.

In this scenario, the money would go directly to the bank to pay off the outstanding remaining balance of your mortgage (up to a certain amount, depending on your policy). It’s important to note that this money cannot be used for anything else.

Who Does It Benefit?

Mortgage insurance serves one purpose: to protect your mortgage debt. Anyone holding a mortgage should have insurance in place to protect it, whether that be with a mortgage or life insurance policy.

Mortgage insurance is usually best suited for young single individuals with no dependents and has some life coverage through work. It also can work great in addition to a life insurance policy where the mortgage insurance would cover the remaining house debt owed and the life insurance payout would be used to cover other expenses.

When Do You Need It?

We always recommend having some sort of coverage to protect your investment. It’s also a good idea to get mortgage insurance when it is offered to you. This allows you to take time to work with an insurance advisor to determine which policy best suits your needs while still having protection in place.

Mortgage insurance usually has a 30-day “free look” period. During this time, if you were to cancel your policy, you’d get refunded the premiums you paid up until that point. Ask your financial institution about the “free look” period before signing up for your mortgage protection insurance policy.

What Is Life Insurance?

Life insurance is normally purchased through an insurance company or advisor. If the insured policyholder were to pass away while the policy was active, the face amount of money would be given to the policyholder’s chosen beneficiaries, typically their family members, upon their death. In other words, it’s guaranteed financial protection for your loved ones in case something horrible were to happen.

Who Does It Benefit?

Life insurance benefits everyone. It gives the insured policy owner peace of mind knowing that their loved ones would be covered if they were to pass away. This money can be used for anything from paying off the mortgage to covering expenses while the loved ones take time away from work to grieve.

Related: Protecting Your Family With Life Insurance: A Guide For Manitobans

When Do You Need It?

We suggest everyone who can protect themselves (and their loved ones) with a life insurance policy gets one. Depending on the type of policy you get (term vs. permanent life insurance), it can guarantee your insurability for life. Plus, you’ll be able to lock in lower insurance premiums while you’re young and healthy.

If you haven’t purchased a personal life insurance policy yet, buying a house is a great time to consult an insurance advisor to determine which policy would best suit your family and unique situation.

Related: Should You Buy Term Or Whole Life Insurance In Manitoba?

What Are The Biggest Differences Between Mortgage And Life Insurance?

While both mortgage and life insurance can help pay off your mortgage in case of death, they function differently.

Some of their main differences are:

  • With mortgage insurance, as your mortgage balance decreases, so does the amount of mortgage insurance. Whereas with a life insurance policy, your premiums and the benefit amount stay the same for the life of the policy term.
  • Mortgage insurance only covers your house debt and gets paid directly to the financial institution. Life insurance provides a lump sum amount that can be spent however your beneficiary sees fit.
  • Mortgage insurance may only cover the first death where two people are named on the policy. A life insurance policy can provide payment for both members when they pass; however, this will depend on the policy in place.
  • Refinancing or moving your mortgage could increase your premiums as the coverage is not portable – unlike an individual policy, which will follow you regardless of where your mortgage is held.
  • Mortgage insurance will expire at a certain age, even though you may still carry a mortgage balance. In contrast, an individual life insurance policy is guaranteed to last the term that you’ve selected (which, in some cases, is until you pass away).

Is Mortgage Insurance Worth It?

Protecting your investment and ensuring that your family is covered in case something were to happen to you is always worth it. That being said, there are many ways to protect your investment. All of them offer their own unique benefits and disadvantages.

Choosing the one that is right for you will depend on the coverage you already carry, your family situation, and your needs.

Is Life Insurance Worth It?

Life insurance isn’t always needed to cover your mortgage. Sometimes, mortgage insurance is enough to cover you and your loved one; however, we usually recommend life insurance for everyone who can afford it.

It benefits you in more ways than one and ensures that your loved ones are covered and protected if anything were to happen to you.

So, Which One Should You Get?

It’s hard to recommend one product over another without knowing your unique situation.

Both mortgage and life insurance have a place and can be the right choice for people, depending on their situation. In some cases, getting both types of coverage may offer the best solution.

Before you choose which policy to go with, make sure you clearly understand the differences and advantages of each policy type. We always recommend discussing your options with an insurance advisor (like us!) before deciding which policy to use.

Life And Mortgage Insurance FAQs

We’re spilling the answers to some of your most-asked questions! 

In most cases, mortgage insurance is more costly than an individual life insurance policy. An individual policy can provide more guarantees and benefits. Life insurance varies a lot from policy to policy and can be tailored to your budget. Comparing these two products is not comparing apples to apples, as they truly are two very different products.

It can! When taking out a life insurance policy, you can decide to include the amount of your mortgage with your total life insurance. In this case, it would be considered “mortgage insurance.”


If having mortgage insurance is a condition of obtaining your mortgage, you can also assign the financial institution to your policy.


We want to be clear that mortgage and life insurance are different products; however, they can both be used to cover the cost of your mortgage if you were to pass.

Everyone’s needs and wants are different, which is why we recommend you meet with an advisor to discuss your options and determine a policy that best meets your needs.


By consulting with an insurance expert, you can ensure that you have the appropriate coverage in place and are adequately protected.

No, mortgage insurance is not generally required in Canada. However, it is left to the discretion of the financial institution. This means that even though the government does not require it, your financial institution may choose to require insurance for you to take out a mortgage.

Yes, it will pay a death benefit in the amount of the insured outstanding debt. This will be paid directly to the financial institution so that they can pay off the mortgage balance.

Find The Best Insurance For Your Needs!

Mortgage and life insurance are similar in that they can both be used to pay off the insured remaining mortgage debt owed if you were to pass. However, despite both being able to serve this need, they are very different products that operate differently.

As with anything, there isn’t a one-size-fits-all solution to protecting your most significant investment. So, the products and policies that will be best for you will depend on your unique set of needs.

We recommend speaking to an insurance expert to get the best policy option. They’ll be able to determine which policy you need, help you get adequately protected, and ensure you’re not paying more than necessary.

So, if you want an insurance expert on your team, reach out! We’d love to help people find the best policy for their unique situation.