When you close on a mortgage, your lender will almost certainly offer you mortgage insurance, a product that pays off the loan if you die. It sounds like it protects your family. In most cases, it protects the bank. Understanding the difference between what the bank sells and what you can get independently can save your family a significant amount of money.
What banks sell is called creditor life insurance. The coverage amount is tied to your remaining mortgage balance, so it decreases as you pay the loan down. Your premiums, however, typically stay the same the whole time. The beneficiary on the policy is the bank, not your spouse or children. When you die, the bank gets paid and the mortgage disappears. Your family gets nothing beyond that.
A personal term life insurance policy works differently. You own it, you choose the coverage amount, and you name your own beneficiaries. If you die, your family receives the money as cash and decides what to do with it: pay off the mortgage, invest it, cover living expenses, or some combination. The coverage amount stays fixed rather than shrinking as your balance falls. And because you own the policy, you can take it with you if you change lenders, refinance, or move.
The cost comparison tends to surprise people. A healthy 35-year-old can often get a 25-year term policy covering the same amount as their mortgage for a similar or lower monthly cost than creditor insurance, with substantially better terms.
CMHC insurance is a separate thing entirely. It's required when your down payment is under 20% and protects the lender if you default. It has nothing to do with what happens to your family if you die. The premium gets added to your mortgage balance.
Creditor insurance is easy to say yes to at the closing table. A personal life policy takes a bit more effort to set up but gives your family real options instead of just a paid-off loan. If your mortgage is closing soon, it's worth getting a comparison before you decide.