Life Insurance or Mortgage Insurance…?

by mcollins

Category: Blog



Hey all,


What is the difference between “Mortgage Insurance” or “Mortgage Protection”  and a product called “Mortgage Life Insurance?”

If you or someone you know is going through the home-buying process than you probably have heard of these products.  There’s a big difference folks, and to cut to the chase — one policy protects the family of the borrower and the other protects the lender.

Mortgage Protection or “Private Mortgage Insurance” (PMI) protects the lender from your potential failure to repay. If you bought your home with less than 20% of the loan amount down, you are likely required to pay PMI. The good news is that with many mortgage loans the PMI is no longer required to be paid once your loan amount falls below 80% of your home’s value. [Example: If your home is worth $100, and you owe $80 to the bank; you have 20% equity or what’s referred to as 80% loan-to-value (LTV) ]


Now for the latter, “Mortgage Life Insurance.” This policy specifically covers the outstanding balance of your mortgage loan in the incident that you pass away during the mortgage term. The problem with this policy is that it is often the wrong choice over a life insurance policy. A life insurance policy will not restrict coverage to the loan balance and instead will give the family of the deceased the opportunity to steward the funds. Also, a life insurance policy will not decline in value in lock step with the loan amount as a Mortgage Life Insurance policy would do.

According to CNN’s researchfewer banks actively advertise this controversial product although many still make it available. If an individual cannot qualify for a life insurance policy, then it might be beneficial to consider a Mortgage Life Insurance policy. Most experts on the matter would recommend you speak to your insurance agent first, to consider what options are best for you.

Speaking with a  licensed professional is the best place to find answers. Contact Podmaska Insurance Agency for a no-obligation insurance review, 800-940-6025.



The views expressed in this post are not necessarily the views of Podmaska Insurance Agency.


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