Default insurance is necessary if you place less than 20% downpayment on a house. There is no way to get around this fee. you can pay it upfront or get it added to your mortgage amount so you dont have to budget for it when buying. The reason the banks require this insurance is so they dont have to worry about losing money if you dont pay your mortgage. In Canada we did not see the housing meltdown like the US due in large part to this insurance and the government gurantees on the mortgages that actually went into default.