What is mortgage life insurance?
Free Insurance Comparison
Secured with SHA-256 Encryption
Asked July 6, 2010
Mortgage life insurance is a special type of insurance policy designed to pay off the mortgage of the property if the policyholder dies. When it was first developed, a mortgage life insurance policy began equal to the amount of the mortgage, and decreased accordingly as the mortgage was paid down. While coverage of this type is still available, most policyholders today use a fixed pay out term life policy instead, which returns the full mortgage amount at any time the policyholder dies, even if it many years after starting the policy.
Mortgage life insurance is sometimes bundled with a mortgage. When it is used in this way, the insurance is meant to protect the lender's investment, and the payout is delivered directly to the mortgage company or lender. You can also buy mortgage life insurance and it is very competitive, with a decreasing value and corresponding premiums. Again, there are no benefits to such a policy beyond paying the remainder of the mortgage. It is more affordable because the risk decreases over time.
Instead of a true mortgage life insurance policy, a term life policy has many advantages. Term life policies do not decrease in value over time, and offer affordable fixed rates. They have emerged as one of the most versatile types of life insurance because of the specific length of the contract term and varieties of term life programs available. Term life does not offer the policyholder involvement that comes with a whole life policy, but that type of insurance is not well suited for mortgage protection.
Answered July 6, 2010 by Anonymous