PolicyMe CEO Andrew Ostro says bank-attached mortgage insurance costs far more than term life and pays out to the lender, not your family
Canadian homeowners who accept mortgage insurance through their lender at the point of application are likely paying two to three times more than necessary for a product that pays out to the bank, not their family. That's according to Andrew Ostro, CEO and co-founder of Toronto-based digital insurer PolicyMe.
Speaking to Insurance Business, Ostro said the convenience of lender-offered mortgage life insurance (MLI) comes at a steep and poorly understood cost, one that mortgage brokers are well-positioned to address for their clients before a loan closes.
"People who have mortgages… should certainly be making sure they have life insurance policies to at least cover that mortgage," Ostro said.
The gap in value is not marginal. Despite providing a higher payout, PolicyMe says term life insurance often costs two or three times less than mortgage life insurance.
For a borrower carrying a mortgage payment already stretching into the thousands each month, Ostro argued, the inflated premium gets absorbed without scrutiny.
What brokers should be telling their clients
The structural differences between lender-attached MLI and a standalone term life policy are significant and rarely explained to borrowers at the time of application.
With lender MLI, the payout goes directly to the financial institution to discharge the mortgage balance. That arrangement removes any financial flexibility from the surviving family.
As Ostro put it: "Maybe the family says, 'I'd rather take that $500,000, continue to pay off my mortgage $2,000 a month and start a business or buy my kids clothing, put food on the table.'"
The payout, he noted, could be critical for families where the primary earner has died and they may not want to extinguish the entire mortgage in a single transaction.
Unlike mortgage insurance, which typically declines as the loan balance shrinks, term life policies maintain a fixed payout and can be used for a range of financial needs.
Premiums on lender MLI policies, however, often do not decline in step with the loan balance — meaning borrowers pay for shrinking coverage at a stable or rising cost.
A third concern is portability of coverage. Most lender-tied policies run for the term of the mortgage, typically five years in Canada. If a borrower's health deteriorates during that period, they may find it difficult or impossible to renew on competitive terms.
A personal term life policy, by contrast, typically locks in both coverage amount and premium for 10 or 20 years or more, providing certainty that lender products do not.
In 2025, the average outstanding mortgage among PolicyMe customers stood at $451,681, yet the average coverage selected was $692,335.
That's more than 50% higher, a figure Ostro says reflects a more sophisticated view of risk, with Canadians recognising that the mortgage is the starting point for financial protection, not the ceiling.
Why most Canadians still reach for the wrong product
The simplicity of the lender product is, by design, its main selling point.
Borrowers are typically asked a short set of health questions during an already lengthy mortgage application process, and coverage is added to the monthly payment with minimal friction.
The alternative, which is applying for a term life policy, involves more questions and a more thorough underwriting process.
Ostro acknowledged that friction is real, but argued it is worth the trade-off.
"When we talk about saving $60 a month for 20 years, it's the wrong choice to prioritize answering fewer questions once, doing it in two minutes instead of 10," he said.
The underwriting rigour of term life also helps explain the price difference. More detailed health information allows insurers to price policies more accurately for lower-risk applicants, a benefit that flows back to healthy borrowers in the form of lower premiums.
For the roughly top two-thirds of applicants from a health standpoint, Ostro said standalone term coverage is substantially cheaper than lender MLI.
For borrowers with more serious pre-existing health conditions, the gap may narrow, and lender MLI may in some cases be the most accessible option available.
The wider context underscores the stakes. A 2025 report from PolicyMe, in partnership with Angus Reid, found that nearly two in three uninsured Canadians, or 65%, said they were unlikely to obtain life insurance within the next five years.
One in four Canadians were not confident their families would be financially secure if they passed away unexpectedly.
Ostro's position is direct: even imperfect lender coverage is better than nothing, but for the majority of mortgage holders in reasonable health, the case for a proper term life policy — cheaper, more flexible, and paid to the family rather than the bank — is difficult to argue against.
"My takeaway would be, if you're going to get nothing, take the mortgage insurance over nothing," he said.
"But what you should be doing is buying a proper term life insurance policy."
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