Mortgage Insurance is offered through a number of insurance companies, banks and other financial institutions. The purpose of this is to review the difference between bank type creditor or mortgage insurance (CIBC in this case) and traditional life insurance policies.
The price comparison table shows that there is not an age at which the CIBC mortgage insurance premiums are less than that offered by traditional personal life insurance policy. As one gets older the differences get larger. In addition, while the traditional life insurance policy from ages 51 to 59 is a 20-year policy, the CIBC mortgage insurance policy ends age 70 so it is less than 20 years and only 11 years at age 59. At age 60, the quotes are for a 10-year policy to keep them comparable to the bank mortgage insurance. However, at age 65 a personal policy goes for 10 years while the bank ends at age 70. A 20-year term was selected for the traditional policy as it is very rare that one remains in their home for more than 20 years and if bank mortgage insurance was being used it would end when the change of houses occurred.
For the purpose of this review, it was assumed that the mortgagees (male and female) were of normal health and that the amount of the mortage was $250,001. If the mortgage was applying for over $500,000 then the traditional insurance is cheaper and less than $250,000 it will be slightly more expensive. In addition, if the mortgage is of better than normal health, and about 40% are, then the traditional insurance would be less expensive and the savings would be over 7% in most cases.
There are also some other options that involve a decreasing term life insurance policy that can realize significant savings over these rates as one gets older. Ask us to see if this might apply to your situation.
Insurance Premiums for $250,000 of Insurance for Mortgages
Male and Female nonsmokers of normal health as of August 20, 2012
** Traditional is quoting T10 for Ages 60, 61 and 65
When one compares bank mortgage insurance to traditional life insurance to protect a mortgage there are many other reasons to choose the traditional mortgage protection in addition to the price. Selected wording from the CIBC mortgage contact as well as a link to it is included at the end.
|BANK MORTGAGE INSURANCE
|TERM LIFE INSURANCE
|No premium discounts for healthy people.
|Significant discounts for people of above average health-excellent cholesterol, blood pressure, family history and no dangerous avocations or occupations.
|The older you are the greater the savings
|About 15 companies competing for your business with significant savings
|Individual policy for you
|Policy is owned by bank-they are the beneficiary and it only pays what is owing
|Policy is owned by YOU and you determine the beneficiary and the face amount is paid. The beneficiary decides what to do with the money.
|Policy is a group plan and can be cancelled
|Policy can only be cancelled by YOU
|NON transferable if you change companies
|Fully transferable if you go to another lender
|Fully convertible (life portion) to a permanent policy which many do for small amounts
|Premiums NOT guaranteed
|Premiums fully guaranteed
|If the mortgage is in default the policy is void
|Insurance continues even if mortgage is in default
|The company can change the policy wording and premiums or cancel it at any time
|Fully guaranteed contract that cannot be changed or cancelled by the company. You can cancel it with a letter.
|NOT guaranteed renewable at mortgage renewal date
|Automatically renewable to age 75
The other question is should you have two individual life insurance policies or a joint first to die life insurance policy. We recommend purchasing two life insurance policies at younger ages if there are children involved as this provides double coverage should both parties pass but starting at age 40 the additional savings of the joint first to die life insurance are worth considering. The table at the end gives the costs for these options from ages 30 to 70.
Finally, one should also consider adding disability insurance for the amount of the mortgage and again a personal policy is highly recommended as one can get a much better coverage, it can last more than the two years that most group plans like bank disability insurance offers and it is portable. When you change lenders, it is not affected.
Contract language in the CIBC Mortgage Insurance Agreement.
To the CIBC’s credit, it publishes the wording of the certificate of insurance, along with the rate schedule. It is available for your reference at and the following excerpts are from this document.
The premiums remain constant throughout the life of your Mortgage Loan unless the premium rate is changed under the Policy and later it states that Canada Life and CIBC reserve the right to change the premium rates under the Policy at any time.
The coverage ends:
- The date you reach your 70th birthday.
- The date your mortgage loan and/or the registered mortgage/charge securing the mortgage/loan in favour of CIBC is assigned to another lender at your request
- The date CIBC and Canada Life no longer offer the insurance
- Plus more-refer to the contract for the other conditions
Even in the contract it states that the certificate represents the general terms and conditions of the Policy. CIBC and Canada Life reserve the right to change the terms of the policy or cancel the policy at any time.
The maximum coverage is $750,000 for all CIBC insured creditor loans.