Mortgage Life Insurance Requirements


Mortgage life insurance is a type of protection (income protection) offered to new mortgage customers. Different from term life insurance where a beneficiary receives a predetermined sum of money after the death of a loved one, mortgage life insurance instead simply pays off the mortgage that the deceased owed upon.


The major determinant in acquiring mortgage life insurance is age. For most insurance companies, life insurance is extended to borrowers only under the age of 62 years old. This can vary, but for most companies this age is fairly consistent.


Most insurance companies require that policy premiums be rolled into the loan payment each month. Depending on the size of the policy, the payment can be as low as $35 to $50 per month or as high as $250 per month. This sum will be added on top of your standard principal and interest payment.


The beneficiary in a mortgage life insurance policy is different from the beneficiary on a term life insurance policy. In mortgage life insurance, the beneficiary is simply required to record a death certificate and present a copy to the insurance company. Then the insurance company mails a check in the full amount of the loan outstanding to the mortgage company.

Finding the Right Mortgage Insurance

Some companies now will pay not only the "death benefit" on mortgage life insurance (the amount required to fully pay off the mortgage), but also the full amount of the policy when obtained. For example, if a borrower obtains a mortgage life insurance policy for $100,000 and, after he or she dies, the mortgage balance is $45,000; some companies might pay the full $100,000 to the beneficiary.


Mortgage life insurance, in many cases, is more expensive and less beneficial than term life insurance. Think carefully and weigh your options against term life insurance policies before accepting mortgage life insurance on your loan. Report any coercive tactics or aggressive selling by your insurance agent to your state's Attorney General.

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