The traditional form of mortgage life insurance was originally purchased for the amount of the initial mortgage. As the amount of the mortgage decreased the coverage of the policy, and the premiums, decreased as well. If the insured person, or persons, died before the mortgage had been fully repaid the mortgage life insurance would be available to pay the remaining balance on the mortgage. Unfortunately, these types of policies are becoming more difficult to obtain in some areas.
Instead, many insurance companies are promoting term life insurance policies for the amount of the initial purchase price of the home. The rates for these term life insurance policies are usually more competitive than the rates of the mortgage life insurance. This means the term life insurance rates are lower and the death benefit is still large enough to pay off the mortgage in the event the mortgage holder dies prior to completely paying of his or her mortgage. The nice thing about term life insurance policies is that they are for a set period of time, usually twenty to thirty years, that coincides well with traditional mortgages.
No matter which policy you are thinking about, the purpose is essentially the same. Mortgage life insurance is purchased to pay off the mortgage in the event that the person or persons responsible for the mortgage die and are unable to do so. The way to decide if this expense is necessary is to consider the necessity of the income of the person or persons who would be insured. For example, in a family where one person provides the majority of the income that person should be insured. If his or her income were no longer available it is likely that the rest of the family would not be able to afford the house. While it is true they could sell the house, they may not want to do that or they may not be able to if the housing market is doing poorly. On the other hand, if one of the family members is a primary caregiver he or she would have to be replaced with someone else. If he or she had been covered by mortgage life insurance the money that had previously been used to pay the mortgage could be used to pay the services he or she would no longer be able to provide.
Is mortgage life insurance right for you? Probably. If you have a mortgage and have no other life insurance that could be used to pay off your mortgage in the event of your death you should definitely consider mortgage life insurance. The minimal monthly cost is well worth the peace of mind that your family would be able to stay comfortably in their home even if you were gone.