How Life Insurance Can Protect Your Home Mortgage

Matt King Life Insurance Editor

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There’s a better way to protect both your mortgage and your family than with traditional mortgage life insurance. Term life insurance is the smarter, more affordable alternative; especially when you shop around and compare coverage amounts and rates.

The sole purpose of mortgage life insurance is to pay off your mortgage if you pass away while you still owe money on your home. Proceeds from this type of insurance do not go through your heirs, but are paid directly to the lender.

Remember: Life insurance agents are generally trying to sell you one of their higher commission products! Always start the process with a general idea of what you're looking for.

Term life insurance can cover more than just the balance of your home loan, and you can still have it match your mortgage length, say 20 or 30 years. There are often more expenses involved for those left behind than just the mortgage if a loved one passes away. By choosing your coverage amount and length, you can personalize your coverage to your needs.

Term life insurance proceeds go to your designated beneficiaries, not your lender. This means that your beneficiaries can use term life insurance proceeds however they want, such as to pay off high interest credit card debt, pay for education, or pay off any medical expenses incurred by the insured before he or she passed away. As mentioned earlier, mortgage life insurance proceeds only go to your lender; they do not go to your heirs. Also, as opposed to mortgage life insurance, term life insurance pays a death benefit even if the mortgage is already paid off.

Term life insurance is simply a better return on your investment. The National Association of Insurance Commissioners (NAIC) says that mortgage insurance lenders pay out only about 40 cents in benefits for every dollar consumers spend buying that type of policy, compared with 90 cents on the dollar paid out to consumers who hold regular term life policies.

Important terms from this life insurance article: mortgage life insurance, term life insurance, home loan

More information online: TermLifeInsurance.com