Mortgage Life Insurance

AAA

DEFINITION of 'Mortgage Life Insurance'

An insurance policy designed specifically to repay mortgage debt in the event of the death of the borrower. These policies differ from traditional life insurance policies in that, for a traditional policy, the death benefit is paid out when the borrower dies; however, a mortgage life insurance policy doesn't pay unless the borrower dies while the mortgage itself is still in existence.

INVESTOPEDIA EXPLAINS 'Mortgage Life Insurance'

There are two basic types of mortgage life insurance: decreasing term insurance, where the size of the policy decreases with the outstanding balance of the mortgage until both reach zero; and level term insurance, where the size of the policy does not decrease. Level term insurance would be appropriate for a borrower with an interest-only mortgage.

Before buying mortgage life insurance, you should carefully examine and analyze the terms, costs and benefits of the policy. Remember, there are two lifespans to consider - your lifespan and the mortgage's.

VIDEO

RELATED TERMS
  1. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Life Insurance

    A protection against the loss of income that would result if ...
  4. Interest-Only ARM

    An adjustable-rate mortgage (ARM) with an initial interest-only ...
  5. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  6. Interest-Only Mortgage

    A type of mortgage in which the mortgagor is only required to ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Insurance

    Insurance Tips For Homeowners

    Use these simple ideas to save money and get better coverage for your house.
  2. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  3. Home & Auto

    5 Insurance Policies Everyone Should Have

    Insurance policies come in a wide variety of shapes and sizes. Shop carefully and the right policies will go a long way towards helping you protect your assets.
  4. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  5. Home & Auto

    6 Reasons To Avoid Private Mortgage Insurance

    This costly coverage protects your mortgage lender - not you.
  6. Options & Futures

    Let Life Insurance Riders Drive Your Coverage

    Find out how these additional benefits can help you customize your policy.
  7. Credit & Loans

    How To Become a Mortgage-Backed Securities Analyst

    Specializing in structured or derivative credit products like mortgage-backed securities requires education and prior experience in the mortgage field.
  8. Investing

    3 Major Risks For Annaly’s Investors

    Thanks to its double-digit dividend yield, Annaly Capital Management has long been a favorite among income-seeking investors.
  9. Investing

    Ready To Invest In Financial Leverage Funds?

    Whenever you invest in a leveraged financial fund or are thinking about doing so, it's important to know the risks that could weigh on its returns.
  10. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.

You May Also Like

Hot Definitions
  1. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  2. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  3. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  4. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  5. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
  6. Irrevocable Trust

    A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets ...
Trading Center