Definition
Mortgage life insurance ensures repayment of the mortgage balance in case of the borrower's or co-borrower's death. It exists in two forms:
**Creditor insurance** (offered by the lender): the bank or credit union is both insurer and beneficiary. Coverage decreases as the mortgage balance decreases, but the premium remains fixed. Eligibility may be contested at the time of claim (post-death underwriting). Coverage stops if you change lenders.
**Individual term life insurance** (subscribed through a financial security advisor): the insured sum is fixed (e.g., $400,000), the beneficiary is the family (not the bank), the premium is calibrated to your actual health profile, and eligibility is verified at subscription (not at death). Portable if you change lenders.
The majority of financial planners recommend individual term life insurance over creditor insurance for its better premium/coverage ratio and flexibility.