Mortgage Life Insurance

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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.

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RELATED FAQS
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    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  2. What is term insurance?

    Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified "term" ... Read Answer >>
  3. Is life insurance good for mortgage protection?

    If you are the primary wage earner in your family and you carry a current mortgage on your home, it is important that you ... Read Answer >>
  4. How can I borrow money from my life insurance policy?

  5. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  6. What is a convertible insurance policy?

    A convertible insurance policy is a term usually related to life insurance. To understand a convertible policy, you must ... Read Answer >>
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