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Mortgage Default Insurance vs. Mortgage Life & Disability Insurance: What’s the Real Difference?
November 12, 2025 | Posted by: Nicholas Pratile
When you buy a home, you’ll likely hear about mortgage default insurance and mortgage life and disability insurance (like the Manulife Mortgage Protection Plan).
They sound similar, but they protect different people for different reasons.Understanding the difference helps you make informed decisions about your home and your financial security.
Mortgage Default Insurance (CMHC, Sagen, or Canada Guaranty)
What it is:
Mortgage default insurance protects the lender, not the homeowner.
It’s required by law when your down payment is less than 20% — also known as a high-ratio mortgage.
Who provides it:
Canada Mortgage and Housing Corporation (CMHC)
Sagen (formerly Genworth)
Canada Guaranty
What it covers:
If a borrower defaults on their mortgage and the lender can’t recover the full balance after selling the property, the insurer reimburses the lender for the loss. This protection gives lenders confidence to approve mortgages with smaller down payments and offer lower rates because their risk is covered.
Who it protects:
- Lender: Yes
- Borrower: No
Key takeaway:
Mortgage default insurance helps you qualify for the mortgage — but it doesn’t protect you or your family if something happens to your income, health, or life.
Mortgage Life & Disability Insurance (Manulife Mortgage Protection Plan)
What it is:
Mortgage life and disability insurance — such as the Manulife Mortgage Protection Plan (MPP) — protects you and your family, not the lender.
It’s an optional insurance product that provides financial protection if you pass away or become unable to work due to illness or injury.
Who provides it:
- Manulife Financial, one of Canada’s leading insurance companies. Offered through mortgage professionals at the time of your mortgage approval
What it covers:
- Life Insurance: Pays off your mortgage balance (up to the coverage limit) if you pass away, so your family can remain in the home.
- Disability Insurance: Covers your monthly mortgage payments while you recover from a disability, easing the financial burden during tough times.
Who it protects:
- Borrower and their family: Yes
- Lender: Indirectly
Key takeaway:
Mortgage life and disability insurance gives you peace of mind knowing your family could stay in the home even if life takes an unexpected turn.
Comparison at a Glance
|
Feature |
Mortgage Default Insurance |
Mortgage Life & Disability Insurance (Manulife MPP) |
|
Who it protects |
The lender |
You and your family |
|
When it’s required |
Mandatory if you put less than 20% down |
Optional at any time |
|
Who pays the premium |
You (added to your mortgage) |
You (separate monthly premium) |
|
What it covers |
Lender’s loss if you default |
Pays off your mortgage or covers payments if you pass away or become disabled |
|
Can you choose provider? |
No (chosen by lender) |
Yes (you choose to opt in) |
|
Tax-deductible? |
No |
No |
Example Scenario
You buy a $600,000 home with 10% down.
Because your down payment is under 20%, you’ll pay a CMHC premium.
If you lose your job or become ill and can’t make payments, CMHC does not cover your payments — their protection applies only to the lender after foreclosure.
If you also have Manulife Mortgage Protection Plan, it could cover your monthly payments during a disability or pay off your mortgage in the event of death, helping your loved ones stay in the home.
The Bottom Line
Think of it this way:
- Mortgage Default Insurance helps you qualify for your mortgage.
- Mortgage Life & Disability Insurance helps you keep your mortgage — and your home — if life changes unexpectedly.
- They complement each other: one protects the lender, the other protects you and your family.
Talk to an Expert
If you’d like to review your mortgage protection options or learn whether Manulife’s Mortgage Protection Plan is the right fit, I can walk you through how it aligns with your goals and budget.
Contact Nicholas Pratile – Mortgages with Nicholas for expert advice on using credit responsibly, refinancing options, and improving your overall financial position.
Call: 416-712-5621
Email: info@mortgageswithnicholas.com
Visit: mortgageswithnicholas.com
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