Mortgage Life Insurance (Explained)
With mortgage life insurance, your beneficiaries are given a payout equal to your mortgage, so they don’t lose the house.
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UPDATED: Jan 9, 2023
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Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Jan 9, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
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term or permanent life insurance, so it’s important to know the difference, especially if you have medical concerns. There are pros and cons to consider regarding life insurance for mortgages, especially given your circumstances. A young family with children and an extensive medical history may have more at stake than a healthy but older couple with no children and little debt. We’ll go over what you should consider when looking at life insurance for mortgage protection, including what sort of policy you should aim for and the benefits and downsides of this type of insurance. Mortgage life insurance protection is exactly as straightforward as it seems. When you purchase mortgage life insurance, it means that you have a specific life insurance policy that protects your family and loved ones if you pass away before you finish paying off your mortgage. Banks often offer it, and only those associated with independent insurance companies and specific lenders. Traditional life insurance will often have a death benefit that is paid out to the beneficiaries of the deceased. The amounts vary depending on the type of life insurance policy that was purchased. This is also why the cost of life insurance also varies. However, with a mortgage life insurance policy, the payout is only for the mortgage amount. You name your beneficiaries, and in the event of your passing, they are the ones who will be given the payout. However, the money is only used to pay off the mortgage in your name. This means that your beneficiaries do not actually receive the money and cannot use it for other means. The money often goes directly to the lender. The payout is also only provided if the loan on the property still exists, and it will only be paid off if the borrower is deceased. Your life insurance quotes are always free. Mortgage life insurance is also vastly different from standard mortgage insurance. Mortgage insurance protects a lender and is sometimes required when purchasing a mortgage. It’s to ensure that, should the person purchasing the mortgage no longer be able to afford payments, the lender wouldn’t be on the hook for any remaining financial debt. So while mortgage life insurance protects the property owner and the holder, a standard mortgage insurance policy protects the lender. So if you’re searching for mortgage insurance in case of death, double-check that the payout goes toward your mortgage. Another option is private mortgage insurance or PMI. This is often required if you make a down payment of less than 20% of the mortgaged amount and is done so that the lender protects themselves in the event you default on the loan. Unfortunately, scam artists will find any means to trick unsuspecting victims into giving up their information. There is a reason why insurance rebating is illegal and why you need to be careful when it comes to giving out your personal information. If you’ve paid off your mortgage and you suddenly start getting phone calls or letters in the mail frantically demanding you purchase a mortgage life insurance policy, chances are it’s nothing but a scam. The scam often includes fear-inducing tactics, such as warning you that you’re running out of time to apply or telling you that your loved ones will suffer financial ruin if you don’t take out a policy. In the same way you have options for auto or homeowners insurance, you can choose what type of mortgage life insurance policy you want. You may also see this type of coverage referred to as mortgage protection life insurance or mortgage protection insurance policies. As mentioned above, just make sure that when you buy a policy, it will protect you, not your lender. You have two choices when it comes to mortgage life insurance: The cost of the premiums for these two policies will vary, so you will want to look at quotes and see which is the most cost-effective for you based on your circumstances. Your life insurance quotes are always free. As with many other types of insurance, purchasing a policy has benefits and downsides. If you cannot obtain life insurance due to medical reasons, you may consider a mortgage life insurance policy as an alternative. Regular or private health insurance with pre-existing conditions should never be impossible to find, but life insurance is a different story. Some pre-existing conditions can cost higher premiums, and some companies may deny you coverage entirely. However, with a mortgage life insurance policy, you’re not required to take a medical test, so signing up is easier, saving time and effort. Another benefit is that with this policy, your beneficiaries will not risk losing the home after your passing. Unfortunately, there are quite a few downsides to this type of policy. They can be expensive and less flexible than other types of life insurance. Your beneficiaries won’t be able to use the payout for other bills or more urgently needed matters, as the money only correlates to what is left on the loan. What you pay for this type of policy is also going to be more expensive than a standard life insurance policy, and that’s even with a declining payout. So you’ll pay more in premiums, but you’ll end up with a smaller payout if you’ve already paid for most of your loan. The good news is that this isn’t a required form of insurance you’ll need when purchasing a home. Often, it’s recommended that you stick with either term life or whole life insurance. These policies tend to be more flexible, allowing your beneficiaries to use the payout wherever the money is needed, and the monthly payments are often lower as well. Mortgage life insurance comes with higher premiums, which means that if you’re a young homeowner with no medical history, you’ll be paying more than if you had term life coverage. A mortgage life insurance premium will also change, with no fixed rates like other policies. Your life insurance quotes are always free. Whether or not you need mortgage protection life insurance will depend on your circumstances. Age and the amount of money you’ll need are both factors to consider when looking into policies. Some mortgage life insurance lenders look at age first. For example, a 30-year-old homeowner may have different choices from a 65-year-old. This is often because of the timelines associated with the policies. There are 15-year and 30-year mortgage life insurance policies available, and a 30-year policy might not be the right choice for someone in their 60s. Some insurers will only work with younger homeowners, so it’s best to request a quote and provide as many details about yourself as possible before deciding on a company. Whether or not you end up with a mortgage life insurance policy will be entirely up to you. It’s not required, and in some cases, term or whole life insurance might be a better fit. If this type of policy seems to suit your personal needs and protect your loved ones, do yourself a favor and get quotes before committing. Comparing prices on an expensive policy could save you some money. If you look at company reviews as well, you can often get a feel for the type of customer service you’ll receive even before you become a policyholder. Is buying mortgage life insurance a good idea? Mortgage life insurance can come in handy if you’re a homeowner with an existing medical history or any health concerns that would put regular life insurance out of reach. Who is given the payout from the mortgage life insurance policy? The money doesn’t go directly to the named beneficiaries but rather to the mortgage lender. The payout is used specifically to pay off the property mortgage. What is the difference between mortgage life insurance and term life insurance? Mortgage life insurance goes directly towards paying off the property loan, whereas term or whole life insurance issues a payout to the beneficiaries of the deceased. In that event, the money can be used wherever it’s most needed. However, with a mortgage life insurance policy, the money can only be used for the mortgage. Is there a difference between mortgage protection and private mortgage insurance? The difference is that mortgage protection protects your beneficiaries, and private mortgage insurance protects your lender. With mortgage protection life insurance, your family won’t have to worry about paying off the mortgage without you. Private mortgage insurance protects your lender if they’re not going to be paid. It’s often required if your down payment is below 20%. Your life insurance quotes are always free. Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
What is mortgage life insurance?
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Are there other types of mortgage insurance?
Are there any scams associated with mortgage life insurance?
What are the offered types of mortgage life insurance?
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What are the benefits of having a mortgage life insurance policy?
Are there any disadvantages to mortgage life insurance?
Is mortgage life insurance required?
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Should you purchase mortgage life insurance?
The Bottom Line: Mortgage Life Insurance
Frequently Asked Questions
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