With 15 years of immersion in the world of personal finance, Ashley Kilroy simplifies financial concepts for individuals striving toward financial security. Her expertise has been showcased in reputable publications including Rolling Stone, SmartAsse.
Ashley Kilroy Insurance WriterWith 15 years of immersion in the world of personal finance, Ashley Kilroy simplifies financial concepts for individuals striving toward financial security. Her expertise has been showcased in reputable publications including Rolling Stone, SmartAsse.
Written By Ashley Kilroy Insurance WriterWith 15 years of immersion in the world of personal finance, Ashley Kilroy simplifies financial concepts for individuals striving toward financial security. Her expertise has been showcased in reputable publications including Rolling Stone, SmartAsse.
Ashley Kilroy Insurance WriterWith 15 years of immersion in the world of personal finance, Ashley Kilroy simplifies financial concepts for individuals striving toward financial security. Her expertise has been showcased in reputable publications including Rolling Stone, SmartAsse.
Insurance Writer Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
| Deputy Editor, Insurance
Updated: Dec 6, 2023, 3:43pm
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
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As exciting as buying a new home is, there are many important decisions to make in the process. One of those decisions is whether you need mortgage life insurance.
Mortgage life insurance, also known as mortgage protection insurance, is a life insurance policy that pays your mortgage debt if you die. While this policy can keep your family from losing the home, it’s not always the best life insurance option.
Mortgage life insurance designates your mortgage lender as the policy’s beneficiary, which means your loved ones don’t get a death benefit if you die during the policy’s term. The lender instead uses the mortgage protection insurance death benefit to wipe out the rest of your mortgage.
A mortgage protection life insurance policy’s premiums remain level during the term, but the policy’s value decreases as your mortgage decreases.
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If you buy mortgage life insurance, you’ll typically purchase it when you buy your home or shortly after. The policy’s length will coincide with the number of years you have to pay off your mortgage.
Mortgage life insurance is usually sold by the mortgage lender, an insurance company affiliated with your lender or another insurance company that mails you after finding your information via public records. If you buy it from your mortgage lender, the premiums can be rolled into your loan.
The mortgage lender is the beneficiary of the policy, not your spouse or other person you choose. This means the insurer will pay your lender the remaining balance on the mortgage if you pass away. Money does not go to your family with this type of life insurance.
This differs from a standard term life insurance policy, which is another option if you’re looking for a life insurance policy to help pay off your mortgage if you die. You could choose a regular term life policy with a face value that’s at least the amount of the mortgage that you still need to pay. If you were to die during the policy’s term, your beneficiaries receive the death benefit, which they may choose to use to pay off the mortgage.
Your beneficiaries can use a term life insurance death benefit for anything, so if you feel paying off the mortgage is most important, you should clearly state that in your will.
The biggest restriction on mortgage life insurance is that your loved ones won’t get a death benefit, but it will instead go to the mortgage lender.
That means your loved ones won’t be able to use any death benefit funds for other common needs when people die, such as final expenses, future education costs, childcare, paying off other debts and providing an income for the surviving spouse.
If you don’t like those restrictions, a standard term life insurance policy for the life of your mortgage with a face value of at least the amount of your mortgage may be a better bet.
Mortgage life insurance covers your mortgage if you were to die.
Unlike other types of life insurance, mortgage life insurance is in place solely to pay off what’s left on your mortgage. It won’t help pay final expenses, childcare and future education costs, which are other reasons people often buy life insurance.
A mortgage life insurance policy’s death benefits go to the mortgage lender directly, so loved ones won’t receive the money.
Mortgage life insurance can give you and your family peace of mind that the mortgage will be paid off. That may also be the case if you buy other types of coverage and specify that you want proceeds spent on paying off the mortgage, but mortgage life insurance benefits go directly to the mortgage lender.
Mortgage life insurance generally does not require a medical exam and it may have no health questions, either.
For those with medical conditions, mortgage life can be an alternative to traditional life insurance that uses health as a factor in pricing.
You may have the option of adding life insurance riders to your mortgage protection policy, such as:
Note that these riders are also typically available on regular term life insurance policies.
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