Mortgage Protection Insurance
Life insurance matched to your home loan balance and term, for homeowners in Texas, Colorado, South Carolina and Michigan.
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Mortgage protection insurance is life insurance bought to pay off or keep paying a home loan if the borrower dies. The face amount is set near the loan balance and the term is set to the years left on the mortgage. It is not the same as private mortgage insurance, which protects the lender; mortgage protection pays your own beneficiaries.
How Mortgage Protection Insurance Works
Most mortgage protection policies are term life insurance in one of two forms:
- Decreasing term: the death benefit drops each year as the loan balance falls, while the premium stays level.
- Level term: the death benefit stays the same for the whole term. As the loan balance falls, the extra money goes to the family.
Riders that can be added include a waiver of premium if you meet the policy's definition of disabled and an accelerated death benefit for a terminal illness. Unlike group mortgage life insurance arranged through a lender, an individual policy pays the beneficiaries you choose.
Mortgage Protection or Lender Credit Life
Banks and credit unions sometimes offer group credit life insurance with a loan. It pays the lender the balance owed, and the benefit shrinks with the loan. The Texas Department of Insurance notes that if you already have life insurance you might not need credit life, because part of an existing death benefit can be assigned to the lender instead. An individual mortgage protection policy stays with you if you refinance, sell or move, and its premium is based on your own age and health, not a group rate.
It is also separate from private mortgage insurance, the coverage a lender may require on a loan with a small down payment. PMI repays the lender if the loan defaults and does nothing for a surviving family.
Mortgage Protection in Texas, Colorado, South Carolina and Michigan
Valor Life Benefits offers mortgage protection to homeowners in Texas, Colorado, South Carolina and Michigan. To size the policy, start with the payoff balance on your latest mortgage statement and the years left on the loan.
Applications ask about health, tobacco use and medications, and some include a short paramedical exam. The Texas Department of Insurance guide to life insurance suggests comparing similar coverage from several companies rather than choosing on premium alone.
Mortgage Protection Questions
Is mortgage protection insurance required?
No. Mortgage protection life insurance is optional coverage. It is often confused with private mortgage insurance, which a lender can require on a low down payment loan, but PMI protects the lender and pays your family nothing. Mortgage protection is coverage you choose to buy for your own family.
How long does mortgage protection insurance last?
As long as the term you choose. Most people match the term to the years left on the loan, such as 15, 20 or 30 years. Coverage ends at the end of the term, or earlier if premiums stop.
Can you cancel mortgage protection insurance?
Yes. It is your policy, and you can stop paying premiums or ask the company to cancel it at any time. Every new policy also has a refund window after delivery, usually 10 days or more, when you can return it for a full refund. If you refinance or sell, the policy does not have to end, because it is not attached to the loan.
Is mortgage protection term insurance?
Usually. Most mortgage protection is level or decreasing term life insurance, sometimes with a waiver of premium or accelerated death benefit rider. Some plans use whole life or a return of premium term policy instead.
How does life insurance help with mortgage?
If the borrower dies during the term, the beneficiary receives the death benefit and can pay off the mortgage, keep making the monthly payment, or use part of the money for other bills. With an individual policy the family decides, not the lender.
Can you get mortgage protection insurance at any time?
Yes. You can apply when you buy the home, years later, or after a refinance. The premium is based on your age and health on the day you apply, so applying sooner usually means a lower premium.