What is Mortgage Life Insurance?

If you own a house and have a mortgage, chances are that the lender included a letter when you signed your mortgage recommending that you buy a mortgage life insurance policy.

Mortgage Life Insurance is sold by insurance companies. It is called mortgage insurance but it is really a decreasing term life insurance that will pay off your mortgage if you die. You buy mortgage life insurance to protect your survivors from having to pay the mortgage.

The premium is structured where the policy begins with a death benefit that is equal to your current mortgage balance. The death benefit decreases at the same rate as your mortgage balance. The premium payments never change but may stop prior to the loan payment. The lender may agree to add the premium payments to your monthly mortgage payment.