Everything You Need to Know About Mortgage Life Insurance

  • Mortgage life insurance is a form of life insurance that pays off the balance on your mortgage when you die.
  • The payout declines at the same rate as the balance on your mortgage, but your premiums stay the same.
  • If you have preexisting health conditions, it’s often easier to qualify for mortgage life insurance than for term life or whole life.

Congratulations—you’ve just bought a new home! Whether it’s your first home where you’re planning to raise your family or your empty-nester’s condo where you intend to enjoy your golden years, it’s likely one of the biggest and most important acquisitions you’ll make in your life. So you’ll want to make sure that if you pass away before you’ve paid off the mortgage, your loved ones can continue to live in your home.

Mortgage protection insurance

That’s why you might be thinking of purchasing mortgage life insurance. According to Investopedia, mortgage life insurance—which is also referred to as mortgage protection insurance—is a form of life insurance that, instead of paying a death benefit to your beneficiaries after your death, pays off the balance on your mortgage.

This type of policy isn’t offered by conventional life insurance companies, but instead by banks that are affiliated with lenders, as well as independent insurance companies.

Do you need it?

The question is, of course, do you need mortgage life insurance? To answer this question, we need to weigh the pros and cons.

One of the big benefits of mortgage life insurance is that it can give you and your loved ones peace of mind. In addition, a lot of mortgage protection life insurance policies require no medical exams and are therefore easier to qualify for if your health isn’t optimal.

On the downside, your beneficiaries have no say regarding how the death benefit is spent, as it will go directly to your mortgage lender. In addition, if you’ve already paid off your mortgage when you pass away, there’s no death benefit. Last, but certainly not least, the payout of a mortgage protection insurance policy usually matches the balance on your mortgage. But as Forbes points out, your premium stays the same.

Find out what your options are

When asking yourself if mortgage life insurance is right for you, it’s important to examine whether or not you can protect your loved ones in another way that might be less expensive. For example, if you’re healthy, you could get a term life insurance policy with the same term as your mortgage—most likely at a lower rate than mortgage protection insurance.

To learn more about ensuring that your loved ones have a place to live in the event you pass away, contact us. Our agents can offer you independent advice and help you make the right choice for you and your family.