How to Protect Your Mortgage with Life Insurance

People purchase insurance coverage to protect many different things, such as their health, their auto, and their home. But one item that oftentimes gets overlooked is the protection of their mortgage. Most people certainly work hard each month to pay their mortgage – especially because a home is typically the largest purchase that most people will ever make.

Yet, if a person was to pass away suddenly, what would happen to their loved ones? Would they still be able to continue making mortgage payments and remain in the home, or would they be forced to move out and live elsewhere due to the financial circumstances that the loss of your income would cause?

Many people end up having to sell their home following the death of a loved one. This places an additional stress on them during an already emotional time. Leaving a place that they call home simply because they can no longer afford the mortgage, however, is an issue that can be prevented simply by purchasing mortgage life insurance.

How Can Mortgage Life Insurance Protect Your Home?

Mortgage life insurance is defined as a type of policy that is created for the primary purpose of paying off a person’s mortgage in the case of the borrower’s death while there is still a balance due. This can help the borrower’s survivors to remain in their home, without having to worry about making ongoing mortgage payments.

This can be especially beneficial if the borrower was the primary wage earner, meaning that his or her loved ones would be losing a significant portion of income upon the individual’s passing. Therefore, in addition to reducing the financial balance of the mortgage, this type of policy can also provide a great deal of peace of mind.

Types of Mortgage Life Insurance

There are two primary types of mortgage life insurance. These are decreasing term and level term. With decreasing term, the face amount of the life insurance policy will decrease along with the outstanding balance of the borrower’s home mortgage. This will continue until both the mortgage balance and the face amount of the policy have reached zero.

With a level term mortgage life insurance policy, the face amount of the plan will remain the same throughout the life of the entire term of the policy. These types of mortgage life policies are a good choice for those who have an interest only mortgage where the amount of the principal balance does not decrease over time.

There is also a policy option that will allow a return of premium at the end of the policy’s term. This plan will require a higher amount of premium than a regular term life insurance policy. However, it has the added advantage of giving back the policy holder’s premiums, provided that the policy remains in effect throughout the remainder of its entire term.

Applying for Mortgage Life Insurance

While mortgage life insurance works in much the same manner as a regular life insurance policy does, with the payout of death benefits upon death of an insured, in many instances, these types of policies will only require a minimal amount of underwriting for approval.

Oftentimes, there is no medical examination required by the applicant for coverage. Because of this, mortgage life insurance can be somewhat easier to qualify for. Therefore, an individual who has certain health conditions may still be able to qualify for this type of life insurance coverage.

Considerations Before Purchasing Mortgage Life Insurance

There are many reasons to consider before purchasing a mortgage life insurance policy. First, having this type of protection can provide your loved ones with the ability to pay off the home mortgage. This will allow them to remain in their home, without the need to drastically change their lifestyle in the event of an otherwise unfortunate situation.

This coverage can also protect your family’s financial security. Because they will no longer be burdened with mortgage debt, they won’t have to struggle financially and forgo the payment of other important debts.

Prior to purchasing a mortgage life insurance policy, it is important to consider several factors, including the costs and benefits of the different types of policies that are available. Today, a mortgage is most people’s biggest expense – and it’s an expense that you don’t want to leave your family saddled with should tragedy strike. By purchasing a mortgage life insurance policy, you can ensure that this cost is taken care of and that those you care about will be able to remain in the place that they call home.


Susan Wright holds a BA from Michigan State University and an MBA from St. Louis University. Having over 20 years of working experience in the insurance and financial services industry, she has trained more than 10,000 financial services representatives. Susan has had licenses in real estate, insurance, and NASD Securities, and she has earned nine industry professional designations, including CLU, ChFC, RHU, REBC, CSA, CLTC, CCFC, CSS, and ADPA. Read more about her on Google+

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