Loading the player...

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.

BREAKING DOWN '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.

RELATED TERMS
  1. Mortgage Insurance

    An insurance policy that protects a mortgage lender or title ...
  2. Decreasing Term Insurance

    A type of annual renewable term life insurance that provides ...
  3. Mortgage

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

    A protection against the loss of income that would result if ...
  5. Credit Life Insurance

    A life insurance policy designed to pay off a borrower's debt ...
  6. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
Related Articles
  1. Insurance

    Why You Don’t Need Mortgage Protection Life Insurance

    Mortgage protection life insurance sounds great – a guarantee that your mortgage will be paid if you die. But first take a hard look at what you get.
  2. Insurance

    The Best Type Of Life Insurance For You Right Now

    Different stages of life call for different amounts of life insurance coverage. Find out what you need, when and why.
  3. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  4. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  5. Insurance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  6. Insurance

    Term Life Insurance: Everything You Need to Know

    Term life insurance is an affordable way to financially protect your loved ones after your death. Here's what you need to know before purchasing a policy.
  7. Personal Finance

    5 Reasons To Save For A Big Mortgage Down Payment

    You may be anxious to buy a home, but taking time to save a large down payment has numerous advantages.
  8. Insurance

    How PMI Insurance is Different than Home Insurance

    Homeowner's Insurance and Private Mortgage Insurance are both common requirements of closing on a mortgage, but each has different uses you should be aware of before purchasing a home.
Hot Definitions
  1. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  3. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  4. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
  5. Long Run

    A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all ...
  6. Quasi Contract

    A legal agreement created by the courts between two parties who did not have a previous obligation to each other. A normal ...
Trading Center