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. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  4. Life Insurance

    A protection against the loss of income that would result if ...
  5. Interest-Only Mortgage

    A type of mortgage in which the mortgagor is only required to ...
  6. Interest-Only ARM

    An adjustable-rate mortgage (ARM) with an initial interest-only ...
Related Articles
  1. Insurance Tips For Homeowners
    Insurance

    Insurance Tips For Homeowners

  2. 15 Insurance Policies You Don't Need
    Insurance

    15 Insurance Policies You Don't Need

  3. 5 Insurance Policies Everyone Should ...
    Home & Auto

    5 Insurance Policies Everyone Should ...

  4. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center