Three things that get confused
These sound alike and do very different jobs.
- Private mortgage insurance (PMI): protects the lender if you default. It pays your family nothing.
- Mortgage life insurance: a policy tied to the loan. The benefit often shrinks as the balance falls and may be paid straight to the lender.
- Term life insurance: pays a fixed amount to the beneficiary you choose, who can use it for the mortgage or anything else.
Why many people use term life
A level term policy matched to the length of the loan keeps the same death benefit for the whole term. If the balance is lower when you die, your family keeps the difference. They can also decide whether paying off the loan is the best use of the money at that point.
Choosing the amount and the term
Start with the payoff balance and the years left on the loan. Then decide whether you also want to cover property taxes, insurance and upkeep for a period, since those bills continue after the mortgage is gone. If two incomes pay the mortgage, consider covering both borrowers.
About the letters you get after closing
Home purchases are public record, so new owners receive a lot of mail about mortgage protection. Most of it comes from marketers and agents, not from your lender, even when it mentions the lender by name. Compare any offer with ordinary term life before you decide.
Common questions
Is mortgage protection insurance required?
No. Lenders can require PMI on some loans, but life insurance to cover the mortgage is your choice.
What happens to the mortgage if I die without coverage?
The loan still has to be paid. Your heirs can keep paying it, refinance, sell the home, or let the lender take it. Life insurance gives them more options.
Can I get mortgage coverage without a medical exam?
Some insurers offer no-exam policies for this purpose. They tend to cost more per dollar of coverage and have lower limits than fully underwritten term life.
This page is general information, not insurance, legal or tax advice. Policy terms, eligibility and pricing vary by insurer and state. A licensed insurance agent can explain the specific products they offer.