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Mortgage Life Insurance

Protecting the home your family lives in is important, and mortgage life insurance is designed to perform that task. Before you purchase the policy, you should familiarize yourself with what a mortgage life insurance policy does. Mortgage life insurance is not the only option, and your family's specific needs and budget should be considered carefully.

How Mortgage Life Insurance Works

One of the most common family goals is to pay off the home. That is the sole purpose of mortgage life insurance, which is sometimes bundled with a home mortgage. It gives you the comfort of knowing that the home will be paid for if you pass away. Mortgage life insurance typically pays directly to the lender, and performs an important role in financial planning.

Diminishing Payout

Mortgage life insurance is based on the value of the home, with a diminishing pay out over the term of the policy. The premiums may not change, but the amount of the policy value would decline. This is because the mortgage value is the insured amount, regardless of how the property value fluctuates. After all, the policy is meant to save the home from financial problems, but it does not extend farther than that. This helps insurance companies keep the cost of mortgage life insurance as low as possible.

Term Life Options

Another popular way to pay off the home loan is to take out a term life insurance policy for the duration of the mortgage. This type of policy costs a little more than mortgage life insurance, but it carries a guaranteed minimum payout and allows you to name the beneficiaries. Having a mortgage life insurance policy can also be coupled with other term and permanent life insurance products to give you the most financial protection for your family's future.

When You Need Mortgage Life Insurance

If you do not have any other life insurance products in force to protect your mortgage, this type of policy will give your home minimal protection. It should not be considered to be the only life insurance you need, as you should also include policies to meet other family goals and events. As a complementary policy, this is one of the least expensive ways to insure your family's home.

About the Author: is a writer for US Insurance Agents. She works hard to help provide a fresh perpsective to insurance, personal finance and related topics.