When Mortgage Life Insurance is Better Than Term Life

Mortgage life insurance can sometimes suit your needs better than term life insurance. Mortgage life insurance is a special type of policy that pays off your mortgage if you die. In most cases, mortgage life insurance pays directly to the mortgage lender, which means the policy has a diminishing payout over the course of the mortgage. Read our guide below to learn when mortgage life insurance is better than term life.

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Nov 22, 2020

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Mortgage life insurance is a special type of policy that pays off your mortgage if you die. In most cases, mortgage life insurance pays directly to the mortgage lender, which means the policy has a diminishing payout over the course of the mortgage. For some people, mortgage life insurance may be available in situations where other types of insurance are not, making mortgage life insurance more accessible to a broad range of needs.

No Mortgage Life Cash Value

A mortgage life policy is a type of term life, meaning that it does not have a face value. The policy is written for a specific number of years, based on your specific mortgage terms. If something should happen to you, the remainder of the mortgage would be paid off, leaving your family with a home to live in. If you should decide to sell the home, you cannot get any of the money you have paid into a mortgage life insurance policy back.

Insurance Restrictions

If you have trouble getting a term life insurance policy to cover your mortgage because of age or health restrictions, a mortgage life insurance policy may be your only recourse. Because the policy is written for a specified value, it is usually easier to get than traditional term policies, and you will not have to undergo a medical exam to qualify for most mortgage life insurance policies. For those with pre-existing conditions, this option will give your family peace of mind.

Where Term Life Fails

Term life insurance has medical requirements which affect the rates and length of the policy. To get a mortgage insured, you may need to go outside some of those requirements, such as being accepted for coverage at an advanced age. The idea is that everyone who has a mortgage needs to be able to protect that home for their family, so mortgage life insurance provides a limited use, affordable alternative to term life insurance products.

People with Medical Conditions

Even people with diabetes or asthma have a right to own their own home, and owning a home means you need to be able to protect the mortgage. Since preexisting medical conditions are often a roadblock to term life policies, mortgage life insurance will guarantee your family’s home will remain in the family even if you are not able to be there first-hand.

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