How Does Term Life Insurance Cover Your Mortgage?

Term life insurance covers your mortgage and gives you peace of mind knowing that if you die before the mortgage is paid off, the life insurance policy will pay the balance.

Function

If you are the insured individual named on the policy, the term life insurance policy pays a claim when you die. If your spouse is the named individual, the policy pays a claim when she dies.

Significance

With term life insurance, your mortgage is paid off when you die and your financial obligation is satisfied. You don't need to worry about leaving any remaining debt to your spouse or children.

Considerations

Consider a decreasing term life policy for your mortgage. While level term life insurance is common, there are other term life policies made for mortgages with balances that decrease over time. With this type of policy, you don't pay for term life insurance after the mortgage is paid off.

References

• "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
• "Life Insurance"; Kenneth Black, Jr., Harold D. Skipper, Jr.; Prentice-Hall Inc.; 1994
• "Life & Health Insurance, License Exam Manual, 6th Edition"; Dearborn Financial; 2004