Can Life Insurance Protect Your Mortgage?

Can Life Insurance Protect Your Mortgage?

By: Angela Colley

Can Life Insurance Protect Your Mortgage?


No one enjoys discussing life insurance, but if your family relies on your income to cover the bills, you need a life insurance policy to protect them if something should happen to you.

If you’re a homeowner, life insurance is even more important. Many types of life insurance safeguard your home and protect your family from foreclosure, but there are angles you’ll have to consider before you sign up.


Mortgage life coverage

After you buy a home, you’ll likely receive several letters telling you to safeguard your house by purchasing mortgage life coverage or mortgage protection service.

These packages are simply a marketing spin on standard life insurance. If something happens to you, your life insurance payout will pay off your mortgage so your family won’t have to worry about possibly losing the roof over their heads.


Decreasing term life insurance

Decreasing term life insurance coverage matches up with the outstanding balance on your mortgage. As you pay off your mortgage and your balance decreases, so does the amount the policy will pay out.

While this type of policy is effective at protecting your family over the life of your mortgage, once you pay off your mortgage, your policy becomes void and you receive no payout.

Holding only decreasing term life insurance has a major downside. Because its purpose is to pay off your home loan, the life insurance policy’s beneficiary is your mortgage lender, not your heirs. For this reason, many people choose a whole life insurance program.


Level term life insurance

Level term life insurance offers policyholders the option of purchasing a policy from an insurance company that matches or exceeds the amount of their mortgage. In case of death, a fixed payout goes to the beneficiaries who can use the money at their discretion, including paying off the mortgage. This offers two major benefits: The coverage amount doesn’t decrease as time goes on, and your heirs can spend the money as they wish.

Deciding on a type of life insurance can be difficult. You’ll have to consider your family’s needs as well as your financial situation. Speak with a financial adviser about your particular situation to help you reach a concrete decision.


Sources images and credits,


Ralph Magin, GRI, CRB – Keller Williams Elite Properties
Broker Associate – 35 Years Experience
305.935.2696 Fax 305.328.9267 –

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