Mortgage Protection Life Insurance

Published: | Updated: January 11, 2017

Definition - What does Mortgage Protection Life Insurance mean?

Mortgage protection life insurance is a type of life insurance policy designed to pay for the insured’s mortgage should they die before having paid the loan off. With these policies, the death benefit equals the amount of the original mortgage loan. As time goes by and the policyholder pays down their mortgage, the death benefit amount also decreases to match the outstanding loan balance. Once the policyholder completely pays off their mortgage, coverage ends.

Insuranceopedia explains Mortgage Protection Life Insurance

Mortgage protection life insurance has advantages and disadvantages. On one hand, its design usually keeps premiums from becoming more expensive over time. Most term life insurance policies become more expensive as the insured gets older. Since the death benefit on mortgage protection life insurance becomes less over time, this offsets the extra risk from the policyholder getting older. As a result, the insurance company typically keeps the cost the same for the entire life of the policy.

On the other hand, mortgage premium life insurance policies can be a bit restrictive. Many require that the death benefit payment go straight to the mortgage lender, not to the beneficiaries. This can be an issue because the beneficiaries may have preferred to use the money for something else other than paying off the entire mortgage all at once. In addition, these policies typically start out more expensive than a regular term policy for the same size death benefit.

How Well Do You Know Your Life Insurance?

The more you know about life insurance, the better prepared you are to find the best coverage for you.

Whether you're just starting to look into life insurance coverage or you've carried a policy for years, there's always something to learn.

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