Mortgage protection insurance, and what the letters after closing don’t say

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.

Level term vs. decreasing mortgage insurance

Some mortgage products have a death benefit that decreases as the loan balance falls, and a premium that stays flat. They can look cheaper up front but pay less each year. A level term policy for the original balance keeps the full amount for the whole term and usually costs about the same, which is why most licensed professionals compare both before recommending one.

Riders worth asking about

Return-of-premium riders refund premiums if you outlive the term. Disability waiver of premium keeps the policy in force if you cannot work. Living-benefit or critical-illness riders advance part of the death benefit after a qualifying diagnosis. Each adds cost; each is worth a question.