You just bought a house. Here is the life insurance checklist.

At a glance

What it is

Life insurance bought with the mortgage in mind; usually plain term, sometimes a decreasing benefit

Who gets paid

Your beneficiary, in cash. Not the lender, unless you assign it

Lender required?

No. Mortgage life insurance is optional and separate from lender-required hazard insurance and PMI

Common terms

15, 20 or 30 years to match the loan

Mortgage protection is life insurance, not a lender product

“Mortgage protection insurance” is a marketing name for life insurance sized and timed to the mortgage. Despite the mailers that arrive after a closing, it is not from your lender and is not required by your loan. Lenders require hazard insurance on the property, and private mortgage insurance protects the lender if you default; neither pays anything to your family if you die.

A level term policy for the mortgage balance, with your spouse as beneficiary, gives your family the cash and the choice: pay off the loan, keep paying monthly and invest the rest, or sell on their own schedule.

Why coverage through work is usually not enough

Employer group life is typically one or two times salary, is not portable when you leave, and can end at retirement. It is a helpful base, not a plan. An individual policy you own goes with you between jobs and can be sized to the actual need rather than to a benefit formula.

The checklist

1. Add up the needLoan balance plus the income years your family would need plus education, minus savings and coverage you already have.
2. Pick the termAt least as long as the loan; longer if the youngest child is far from independence.
3. Cover both earnersAnd the at-home parent whose work would have to be replaced.
4. Name the beneficiary carefullyA spouse or a trust for minor children; never a minor directly, and not the lender unless you intend that.
5. Compare before you buyMortgage-protection mailers, your employer plan, and an individual term quote from several carriers.