Can you get insurance to pay off your home if you die?
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Asked February 10, 2011
There is a particular type of term life insurance known as mortgage insurance. This type of coverage has a pay out value that decreases as it gets older, and then expires after a predetermined period of years. Typically, the insurance policy is tied to the mortgage of the home, and has a decreasing payout that matches or surpasses the expected mortgage value over time. It is not unusual to have a mortgage coverage policy in addition to other term or whole life policies, with each policy meant fulfill certain financial responsibilities.
Any term life insurance policy can be set up to expire when your mortgage is paid off, but they won't offer the advantages of a traditional mortgage insurance policy. Whole life insurance, on the other hand, is not well suited to paying off a mortgage in it's native form. These types of insurance can be stipulated for specific uses in your Last Will and Testament, and that could include paying off the mortgage out of the cash pay out amount. In general, whole life insurance is better suited to handling your final expenses or creating a nest egg your children to inherit.
Mortgage Life Insurance is the flavor of life insurance that is specifically designed to pay off the home mortgage in case of the death of the policyholder. It provides a diminishing payout, but offers lay premiums. In many situations, the policy names the mortgage holder as the beneficiary so that the home is automatically paid for. Remaining funds after the mortgage is paid off are then passed on to the heirs of the estate.
Answered February 10, 2011 by Anonymous