Insurance is all the same. Right?

Insurance is all the same. Right?

Nope, not true.  A few weeks ago, you might have read my blog about Jennifer and how she was able to save money on her mortgage insurance by purchasing a private Term Insurance policy versus the offering through her lender. It makes me happy to be able to help people keep expenses down and ‘get a deal’. In this case she will save a significant amount of money over the life of the mortgage and her plan is to put the savings into her TFSA. That’s really cool but what I want to talk about are some of the other differences between private and lender insurance. Differences like underwriting, payout, beneficiaries and coverages offered.


  • Lender – underwritten at time of claim with minimal information gathered about your health state and other uninsurable risk factors at time of purchase. This can result in possible denial of a claim.
  • Private – underwritten at time of purchase meaning that there is less risk of a claim being denied.

Cost of insurance

  • An individual’s health, gender, smoking status and age are NOT factored into the rates charged for lender insurance, but they are for private coverage.
  • A young, healthy non-smoking person will be able to get a much better rate for private insurance than for lender insurance.

Total cost of insurance over life of borrowing

  • Lower rates mean the cost of insurance over the life of the policy will be lower, therefore saving you money in the short and long term.

How the coverage works? How much coverage?

  • As the value of the mortgage (or other debt) decreases so does the coverage payable from the lender insurance.
  • With private insurance, the coverage value never decreases.

What happens in a claim,? Who is the beneficiary? Why does that matter?

  • Lender  insurance – beneficiary is the lending institution, and the funds are used to pay off the remaining debt.
  • Private insurance – beneficiary is whoever you choose, and the funds can be used any way the beneficiary chooses.

Coverage amounts over time especially for couples

  • With lender insurance, although the mortgage is in two names and the insurance covers two lives, the mortgage can only be paid off once, when the first person dies.
  • With private coverage, insurance can be put on both lives and paid out individually when each individual dies. This essentially doubles the amount of coverage available through your lender.

It’s your money. It’s your debt. It’s your family that you are trying to protect. It’s your choice. Which do you think is a better fit for your family?

By Patrick Jamieson