What Is Mortgage Protection Life Insurance 

What Is Mortgage Protection Life Insurance

If you are not sure what mortgage protection life insurance is, don't feel bad, many people haven't even heard of this type of policy before. Basically, mortgage protection life insurance coverage is a specific kind of a term life insurance policy that has its duration and death benefit tied to your mortgage.

This is not to be confused with a private mortgage insurance policy, which is required if you do not have a 20 percent down payment to protect the lender if you fail to make payments. This is intended to be able to pay off the remainder of your mortgage in the event of your death so that your loved ones do not need to worry about it. Depending on your personal situation, finances and health however, there may be other types of insurance policies that might be more beneficial to you.

Term Life Insurance Coverage for Your Mortgage

Mortgage protection coverage only lasts as long as your mortgage does, so they often come in term lengths of 15 or 30 years. This is a type of decreasing term life policy, since the death benefit paid out is whatever is left to pay on your mortgage. So as time passes and you continue to pay on your mortgage, there's less and less mortgage to cover if you die, so the death benefit paid out will inversely reduce.

For example, if you get a 30 year mortgage and get a mortgage protection life insurance policy to go along with it, and then you pay your mortgage every month for 29 years and then die, the policy will only have to cover the last year. The opposite is also true however, if you die after say, 5 years, then the policy will pay out the remaining 25 years.

Understanding Mortgage Protection Life Insurance

  • Coupled to the length and amount of your mortgage
  • Death benefit reduces over time, premiums stay level
  • Can only be used to pay off your mortgage

Pros and Cons for Mortgage Protection Life Insurance Coverage

As is true with any major financial decisions, it is very important to get a clear picture of your situation and weigh your options carefully. One of the benefits to this type of policy is that you can get life insurance coverage with no exam beforehand, since this is a type of guaranteed issue policy.

A mortgage protection life policy can definitely give you some peace of mind about paying off your mortgage and providing a place for your family to live when you are gone, but there are other costs to consider as well. These types of policies only go towards paying off the mortgage, but what about any other outstanding debt you have, or things like funeral expenses and burial costs? If you want to provide protection for these things too, then perhaps a term life insurance policy or another kind of coverage might be better.

Comparing Term Life Policies to Mortgage Protection Life Insurance

Term Mortgage Protection
Price Generally costs less Generally costs more
Length Specific period of time Covers length of mortgage
Death Benefit Stays the same throughout Decreases with every mortgage payment
Other benefits Can cancel or upgrade at any time, exam often required No medical exam necessary

Deciding What Is Best For You

Still not sure if this type of insurance is right for you? The best bet to make sure you are making a solid decision is to talk to an expert about it first. We can help you find life insurance brokers that aren't loyal to one specific company and won't try to just sell you one type of policy either, they want to take time with you to figure out exactly what you need and help you find the best policy possible.

Disclaimer: TermLifeInsuranceUSA.com is not a licensed insurance agency or broker. The content of this website is for informational and comparative purposes only and is not intended to take the place of professional advice from a licensed insurance agent. TermLifeInsuranceUSA.com recommends that all consumers consult with a licensed insurance agent before purchasing any insurance policy.

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