Can Life Insurance Also Cover My Home Mortgage?

When buying a new home there are so many exciting as well as nerve racking thoughts and questions going through your head. It is often times debated whether or not to buy mortgage life insurance, not knowing there are other options. 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.

What is Term Life Insurance?

Term life insurance is known for being the most affordable option compared to permanent life insurance because it does not add up any cash value to invest in and it ends when the term of your contract ends it is not a lifetime coverage.

Life insurance coverage going hand in hand with home mortgages

It is also the better option because allows your whole family to be protected in case something unexpected happens to you, meaning your spouse of loved ones will receive the policies values. This allows the mortgage to be paid off potentially tax free.

What is Mortgage Life Insurance?

The sole purpose of mortgage life insurance and term life insurance is to pay off your mortgage if you pass away while you still owe money on your home. Proceeds from mortgage life insurance do not go through your heirs but are paid directly to the lender. While your mortgage will most likely go away, your spouse or loved ones will not receive any of the proceeds. In addition, the premiums of the policy may always remain the same while the value of the policy can decrease if your mortgage declines.

What Will Term Life Insurance Cover?

Term life insurance can cover more than just the balance of your loan, and you can still have it match your mortgage length, say 20 or 30 years.

Term life insurance coverage based on your home mortgage payment

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.

As mentioned earlier, 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. 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. According to the National Association of Insurance Commissioners (NAIC), 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.


  1. Personal Life Term Insurance, Nationwide.
  2. Mortgage Protection Insurance, Nationwide.
  3. Lender Placed Insurance, National Association of Insurance Commissioners.