What is Mortgage Life Insurance?

Perhaps the best place to begin with this topic is not with a definition of what mortgage life insurance is... but what it is not.

There is often confusion between Private Mortgage Insurance (PMI) and Mortgage Life Insurance.  Private Mortgage Insurance is a plan that you are required to purchase when buy your home if you have less than 20% of the home's value as a down payment.  So basically, if your lender is loaning you more than 20% of the value of your house-- you can expect to pay them for PMI as well.  Since 1998, when Congress passed the Homeowners Protection Act, things have gotten a bit easier when it comes to whether or not you need to continue to pay for this coverage-- but it is still required.

Mortgage Life Insurance, on the other hand, is a sound concept.  If you die unexpectedly, the insurance company supplying your Mortgage Life Insurance will pay off your home loan for you.  Your spouse and children can continue living their lives without the possible disruptive move into more modest digs.

Is it really "Mortgage" Life Insurance?

Now here's where we could confuse some folks... or not.  If this type of insurance policy covers an individual if they pass away... isn't this just plain old life insurance?  The answer is "yes".  In actuality, Mortgage Life Insurance is nothing more than marketing lingo for term life insurance with a twist.  Here's how a mortgage life insurance plan might be different:

• It may be non-medical.  Mostly, these plans are issued using simplified underwriting practices.  The insurer will ask some questions in an application but may not require blood or urine as with a traditional term life insurance policy.

• Bells and whistles are included.  Mortgage Life Insurance plans generally offer some disability income insurance coverage as well as the term life insurance component.  The rationale being that if you have a disability plan in place, you can continue to pay your home loan if you can't work due to illness or injury.

• It may decrease in face amount over time to mirror the decrease in principal on your loan.

Most consumers of life insurance products are better off pursuing a traditional term life insurance plan over a plan marketed as "Mortgage Life Insurance".  Call it what you want... life insurance for your mortgage, loan protection coverage... whatever.  We'll call it a duck--since it walks and quacks like one. 

The truth is, most people can do better with a term life insurance plan. 

• You'll get more coverage for less premium.  Why?  Insurance companies will give you a better rate when given the opportunity to look you over.  If you let them do their due diligence (and you're reasonably healthy), chances are you'll pay far less with a traditional term life insurance plan. 

• If having the bells and whistles gives you peace of mind-- ask your agent how much it will be to add riders to customize a policy that looks like the other "ducks" on the market.  You may find yourself coming out way ahead price wise.

• Also-- purchasing a plan with such a narrow focus is never a good practice.  You need life insurance for many reasons-- your home may be important-- but what about educations for the kids, child care services if the main caregiver dies, and the time an adequate face amount will buy you if you need to, perhaps, go back to school or relocate? 

Term life insurance can provide all of this and with a level term life insurance plan-- the face amount will not decrease.  Regardless of how much you have left on your home, the insurer pays the beneficiary-- you-- the face amount of the policy.  It's up to you to decide how best to put it to work.

So call it Mortgage Life Insurance if you please-- but make no mistake.  Life insurance covers the life of the insured person and ideally it should pay someone you designate as the beneficiary-- not the bank.  Feel free to run as many quotes as necessary through the carriers listed on our website.  They all offer "Mortgage Life Insurance"-- but armed with your new knowledge-- you'll know your options.  Compare life insurance premiums of the traditional level term life insurance plans with the plans marketed solely as mortgage life insurance and the right decision is only a click away.        

Click the following link to visit our home page, enter your state of residence and choose a provider of Mortgage Life Insurance - Level Term Life Insurance.