Comparing Mortgage Insurance Options in Quebec

Optional mortgage insurance is never mandatory, but it protects your family and assets in case of unforeseen events. In Quebec, the Act respecting the distribution of financial products and services (LDPSF) requires your advisor to inform you of the different options available. Understanding the differences between lender insurance and individual insurance can save you significantly while providing better protection.

Lender insurance: advantages and limitations

Insurance offered by your bank or credit union is convenient because it is integrated into the mortgage process. However, it has important limitations. The premium is based on the declining balance, meaning coverage decreases over time while the premium remains stable or increases with your age. The beneficiary is the lender, not your family. Coverage is not portable: if you change lenders at renewal, you lose your insurance and must subscribe to new coverage, possibly at a higher cost due to your age or health changes. The most concerning risk is post-mortem acceptance: your eligibility is verified at claim time, not at subscription.

Individual insurance: the recommended solution

Individual insurance subscribed with a private insurer offers several advantages. The premium is fixed and based on your health profile at the time of subscription: it will not change even if your health deteriorates. Coverage is a fixed amount that does not decrease with your mortgage balance. The beneficiary is your family, who receives the capital and decides how to use it, whether to repay the mortgage, cover living expenses, or invest. The insurance is portable: it follows you from one lender to another without interruption or new subscription. Acceptance is confirmed at subscription after the medical exam, eliminating the risk of denial at claim time.

Numerical cost comparison

• Lender insurance for a 35-year-old non-smoker, $300,000 balance: about $80 to $120 per month for declining coverage. Over 25 years, total cost is $24,000 to $36,000.
• Individual insurance (20-year term, $300,000): about $30 to $60 per month for a similar profile, fixed $300,000 coverage. Over 20 years, total cost is $7,200 to $14,400.
• Potential savings with individual insurance: 30 to 50% over the duration, with superior coverage since the amount does not decrease.
• Additional advantage: individual coverage can include critical illness and often offers guaranteed renewal options.

What Quebec law requires

In Quebec, the LDPSF requires your advisor to inform you of the existence of both types of insurance. You are never required to subscribe to lender insurance, even if the signing process may give that impression. If you wish to cancel lender insurance, you can do so at any time without penalty. Simply ensure you have individual coverage in place before cancelling. An independent AMF-certified insurance broker provides an objective comparison and helps you find the best coverage at the best price.