Mortgage Insurance

Mortgage insurance in Canada, explained.

Q: Is mortgage insurance mandatory?

Only mortgage default insurance is mandatory, and only when your down payment is under 20% of the purchase price. Mortgage protection insurance (the optional life / critical illness / disability coverage the lender offers at signing) is never required to get a mortgage — you can decline it and buy a personal policy instead.

Q: What's the difference between mortgage default insurance and mortgage protection insurance?

Mortgage default insurance protects the lender if you stop paying and is mandatory with less than 20% down. Mortgage protection insurance protects you and your family — it pays down the mortgage if you die, fall critically ill, or become disabled — and is always optional. One is about the loan; the other is about your life. Don't confuse the mandatory default premium with the optional protection coverage.

Q: Does mortgage protection insurance cover critical illness and disability?

It can. Lenders typically offer mortgage life insurance (pays the balance if you die), and often add critical illness (a lump sum on a covered diagnosis) and disability (covers your payments if you can't work) as riders. Coverage terms vary by lender and are often post-claim underwritten, so it's worth comparing a personal policy — see mortgage life vs term life.

Three completely different products all get called “mortgage insurance” in Canada. Here's what each one actually is — mandatory CMHC mortgage default insurance, optional mortgage protection (life, critical illness and disability) insurance, and personal term life — who needs which, how the premiums are calculated, and how to avoid paying for the wrong one.

Default vs protectionCMHC premiumsLife · critical illness · disabilityOptional creditor insuranceOntario & Canada-wide

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Written by the Mortgage Squad Advisors Editorial Team · Reviewed by Surrayya Afzal, Principal Broker, FSRA #M14001433 · Updated July 2026

Example 5-yr fixed

4.14%

rate as of Oct 9, 2026 · illustrative, not a quote

Your estimated payment

$3,202/mo

25-yr amortization · semi-annual compounding

Property value$750,000

Down payment$150,000

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Search “mortgage insurance” in Canada and you'll get three unrelated answers — and lenders rarely stop to explain the difference before you're signing. One kind is mandatory and protects the lender; another is optional and is meant to protect your family (but often pays the lender instead); the third is a personal policy you're usually better off buying yourself. Tick the wrong box and you can pay a flat premium for shrinking coverage the bank keeps. We map which one your file actually needs — and which to skip.

A mortgage advisor handing house keys to a young couple at a desk

Whether you searched “mortgage insurance”, “mortgage loan insurance”, or “mortgage protection insurance”, this page sorts out which coverage applies to your file — and which to skip.

On this page

Three different things are all called “mortgage insurance”
Mortgage default insurance (CMHC, Sagen, Canada Guaranty)
Mortgage protection insurance: life, critical illness and disability
Our honest role — and how to avoid overpaying
FAQ

Three different things are all called “mortgage insurance”

The single biggest source of confusion is that one phrase covers three unrelated products.

1. Mortgage default insurance (CMHC, Sagen, or Canada Guaranty) is mandatory whenever you're buying a home with less than 20% down. It protects the lender, not you, if you stop making mortgage payments¹, and in exchange you get access to the lowest insured rates. Full detail on the premiums and providers is on our CMHC mortgage insurance page.

2. Mortgage protection insurance (also called creditor or “mortgage life” insurance) is optional coverage the lender offers at signing. It's supposed to pay off — or keep up payments on — your mortgage if you die, suffer a critical illness, or become disabled. It's never required to get a mortgage.

3. Personal term life insurance is a policy you buy yourself from a licensed life insurer. For most people it's the better way to protect a mortgage — cheaper, portable, and your family controls the payout. We compare it head-to-head on mortgage life vs term life.

Mortgage default insurance (CMHC, Sagen, Canada Guaranty)

If your down payment is under 20% of the purchase price, mortgage default insurance — often just called “CMHC insurance” — is mandatory. The premium is a percentage of the mortgage loan based on your loan-to-value: about 4.00% at 5% down, 3.10% at 10% down, 2.80% at 15% down, and 0% once you reach 20% down². On a $500,000 mortgage at 95% loan-to-value that's roughly a $20,000 premium — almost always added to your mortgage balance and paid off over the amortization, so it doesn't come out of pocket up front.

Watch two things at closing: in Ontario, Quebec and Saskatchewan you pay provincial sales tax on the premium in cash on closing day (it can't be financed)², and mortgage default insurance is only available on a purchase price under $1.5M, with 30-year amortization allowed for first-time buyers and new builds³. Get your exact number on the CMHC premium calculator, and see how insured, insurable and conventional pricing compare on the CMHC insurance explainer.

Mortgage protection insurance: life, critical illness and disability

This is the optional coverage a lender adds with a single checkbox when you sign. It usually comes in three flavours: mortgage life insurance pays your remaining mortgage balance if you die; critical illness coverage pays a lump sum (often enough to clear or reduce the mortgage) if you're diagnosed with a covered condition like cancer, heart attack or stroke; and disability coverage keeps up your mortgage payments if an injury or illness stops you working.

The premium is typically based on your mortgage balance and age — and here's the catch most buyers miss: with mortgage life coverage the payout shrinks as you pay the mortgage down, but the premium usually stays flat, so you pay the same for less and less protection⁴. The payout also goes to the lender, not your family. Because of that, a personal term life (and standalone critical illness / disability) policy is usually the stronger, cheaper way to protect your family — you own it, it's level, and it's portable if you switch lenders. It can still make sense to tick the lender's box as a short-term stopgap, or if a health condition makes personal coverage hard to get.

Our honest role — and how to avoid overpaying

Mortgage Squad Advisors is a licensed mortgage brokerage (FSRA #13737), not a life-insurance advisor. We handle the mortgage side in full — including telling you exactly when default insurance applies and shopping the sharpest insured rate — and we'll flag the trade-offs on the lender's optional protection insurance so you don't sign on autopilot. For the actual life, critical illness or disability policy, we refer you to a licensed life-insurance agent.

Two ways to avoid overpaying: on default insurance, a larger down payment drops you into a cheaper premium band (or removes it entirely at 20%), and the lower insured rate often more than offsets the premium — we model both. On protection insurance, compare a personal term policy before you check the lender's box; it's one of the easiest places in the whole mortgage to pay more for weaker coverage. See the full breakdown on mortgage life vs term life.

What you get

Why Canadians choose Mortgage Squad Advisors.

We tell you exactly when mortgage default insurance is required — any purchase with less than 20% down

Insured (high-ratio) rates shopped across 100+ lenders — often the lowest on the board

Your CMHC / Sagen / Canada Guaranty premium calculated to the dollar, plus the PST you pay in cash at closing

The optional “mortgage protection” insurance the lender offers at signing — we flag the trade-offs before you tick the box

Life, critical illness and disability coverage explained — then referred to a licensed life-insurance agent (we don't sell it)

Insured vs insurable vs conventional modelled for the lowest all-in cost, not just the lowest rate

How it works

Three simple steps, no pressure.

Figure out which “mortgage insurance” you mean

Default insurance (CMHC), protection insurance (life / critical illness / disability), or personal term life — we sort out which one applies to your purchase in a 5-minute conversation.

Model the real cost

For default insurance we calculate your exact premium band and the provincial PST; for protection coverage we lay out the trade-offs versus a personal policy, in plain numbers.

Get the right coverage, skip the rest

We arrange the mortgage with insured pricing where it wins, and refer you to a licensed life agent for any personal life, critical illness or disability coverage — no pressure to add anything you don't need.

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FAQ

Common questions, answered.

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What is mortgage insurance in Canada?

“Mortgage insurance” is really an umbrella for three unrelated products. Mortgage default insurance (CMHC, Sagen, Canada Guaranty) is mandatory with less than 20% down and protects the lender. Mortgage protection insurance is optional life, critical illness or disability coverage the lender offers that pays down your mortgage. Term life insurance is a personal policy you buy yourself. They're often confused because they share a name — but they do completely different jobs.

Is mortgage insurance mandatory?

Only mortgage default insurance is mandatory, and only when your down payment is under 20% of the purchase price. Mortgage protection insurance (the optional life / critical illness / disability coverage the lender offers at signing) is never required to get a mortgage — you can decline it and buy a personal policy instead.

How much is mortgage default insurance?

It's a percentage of the mortgage loan based on your loan-to-value: about 4.00% at 5% down, 3.10% at 10% down, 2.80% at 15% down, and 0% at 20%+ down. On a $500,000 mortgage that's roughly a $20,000 premium at 5% down — usually financed into the mortgage. In Ontario, Quebec and Saskatchewan you also pay provincial sales tax on the premium in cash at closing. Get your exact figure on the CMHC calculator.

What's the difference between mortgage default insurance and mortgage protection insurance?

Mortgage default insurance protects the lender if you stop paying and is mandatory with less than 20% down. Mortgage protection insurance protects you and your family — it pays down the mortgage if you die, fall critically ill, or become disabled — and is always optional. One is about the loan; the other is about your life. Don't confuse the mandatory default premium with the optional protection coverage.

Does mortgage protection insurance cover critical illness and disability?

It can. Lenders typically offer mortgage life insurance (pays the balance if you die), and often add critical illness (a lump sum on a covered diagnosis) and disability (covers your payments if you can't work) as riders. Coverage terms vary by lender and are often post-claim underwritten, so it's worth comparing a personal policy — see mortgage life vs term life.

Do you sell mortgage life insurance?

No. We're a licensed mortgage brokerage (FSRA #13737), not a life-insurance advisor. We handle the mortgage — including telling you when default insurance applies and shopping insured rates — and we explain the trade-offs on the lender's optional protection insurance so you don't overpay. For the actual life, critical illness or disability policy, we refer you to a licensed life-insurance agent.

Related products

CMHC insurance explained CMHC premium calculator Mortgage life vs term life High-ratio vs conventional First-time buyer Bad credit mortgage

Sources & references

Figures on this page are sourced below and re-checked each quarter. Rates, insurer rules and lender policies change — confirm anything you plan to act on with a licensed advisor.

1. CMHC, What is mortgage loan insurance? (accessed Sep 2026) — Mortgage loan insurance is generally required when the down payment is under 20% and protects the lender, not the borrower.
2. CMHC, CMHC mortgage loan insurance cost (accessed Sep 2026) — Premium schedule by loan-to-value (4.00% at 90.01-95%); provincial sales tax on premiums in Quebec, Ontario and Saskatchewan cannot be added to the loan.
3. Department of Finance Canada, Mortgage reforms in force December 15, 2024 (accessed Sep 2026) — $1.5 million insured price cap; 30-year insured amortization for first-time buyers and new builds.
4. Financial Consumer Agency of Canada, Optional mortgage insurance products (accessed Sep 2026) — Mortgage life premiums generally stay the same while the benefit falls with your balance; term or permanent life insurance may provide better value.

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Mortgage insurance by market

Whether default insurance applies to you is a local question. It turns on your price band against the tiered minimum down payment, and on the $1.5 million ceiling above which the insurance can’t be bought at all. Each market hub works that out against its own sourced average price.