The coverage that stays with your family, not with the mortgage
You will move house, refinance, or renew before this mortgage is done — most families do at least one of the three. That is the part of the mortgage protection decision that rarely gets discussed at the signing table, and it is where the two options separate most clearly.
The calculator above compares the coverage a lender offers on your mortgage with a level term policy of your own, on the same balance and the same years remaining. Below we look at what each one does when your circumstances change, and at what your family is actually left holding.
Mortgage Protection Calculator
The insurance your lender offers at signing and a policy you buy yourself do different things. This compares them on the same mortgage so the difference is visible rather than theoretical.
Creditor insurance premiums are modelled on the published per-$1,000-of-balance rates lenders charge, which are age-banded but not medically underwritten. Term rates assume standard health. Estimates, not quotes.
Coverage tied to a loan does not follow you
Creditor coverage exists because that mortgage exists. Discharge the mortgage — by moving, by refinancing elsewhere, or by paying it out — and the coverage generally goes with it. Whatever you arrange at the new lender is a fresh start priced at your age and health at that moment, which for most families means a few years older than when they first signed.
A level term policy you own works the other way around. It belongs to you rather than to a loan, so it is portable: the house can change, the lender can change, the balance can change, and the policy carries on with the same face amount and the same premium you were issued at. If you plan on a move or expect to shop your renewal, that portability is worth weighing as heavily as the monthly cost.
What you are leaving behind, and to whom
With the lender's product, the benefit is paid to the lender and applied to the balance. The mortgage is cleared, which genuinely helps — but that is the whole of it. Your family receives no funds and makes no decisions. There is nothing left over for the funeral, nothing for the months when one income has become none, and no option to keep a good rate in place and use the money differently.
A term policy pays the person you name. They can retire the mortgage outright, or keep paying it and use the benefit for income, education, a final expense bill, or breathing room while the estate is sorted out. The same event, the same dollars, and a family that gets to choose — which is closer to what most people had in mind when they bought protection in the first place.
The trade-offs worth being straight about
Term coverage has a real cost that price alone does not show: you have to qualify. There are health questions, likely a paramedical, and the insurer can decline or rate you. Creditor coverage generally skips that at application, is usually not smoker-rated, and is normally assessed at claim time instead — which is why it can be the more accessible product for someone whose health would make individual underwriting difficult. For that family, the lender's coverage is the right choice, not a consolation prize.
It is also worth clearing up a Canadian naming muddle: CMHC default insurance, the premium on a down payment under twenty percent, is commonly called mortgage insurance too. It protects the lender against default and pays your family nothing, and it is not what this calculator addresses. And if you already hold creditor coverage, compare before replacing it — apply, get approved, and make sure the new policy is in force before you cancel anything.
Frequently asked questions
What happens to my mortgage insurance if we sell and buy another home?
Coverage attached to a mortgage generally ends when that mortgage is discharged, so a new home means arranging new coverage at your current age. A level term policy you own moves with you, unaffected by the sale or the new loan.
Does the coverage amount change if I renew at a different lender?
With creditor coverage you are typically starting over on the new lender's terms and at your present age. Your own term policy keeps the same face amount and premium regardless of who holds the mortgage.
Why does the benefit go to the lender and not to us?
Because the lender, not your family, owns the coverage under that arrangement — the proceeds are applied to the balance by design. A policy you own names your own beneficiary, so the money and the decision both stay with your family.
Is term coverage more than we need if the mortgage is shrinking?
A level benefit does grow past the balance over the years, and that surplus is the point rather than a flaw. It is what covers the costs a paid-off mortgage does not: a funeral, replaced income, and the ordinary bills that keep arriving.
We may not pass a medical. Is the lender's coverage still worth taking?
Yes. When health makes individual underwriting difficult or expensive, creditor coverage is often the accessible option and clearing the mortgage is a meaningful protection for a family. Try the underwritten route first so you know your options, but do not treat the lender's product as no coverage at all.
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