How does life insurance on a mortgage work?
Essentially when you die the amount you are insured for will be paid to your beneficiaries. That money will be used to pay off the mortgage, hence the name. Some folk think that the mortgage company gets the money but they don’t – it goes to your loved ones.
What kind of insurance pays off your house if you die?
Either fixed-term mortgage insurance or level term mortgage insurance will pay off your house when you die. Fixed-term mortgage insurance has higher premiums than decreasing term insurance so you need to consider how much you want to leave coupled with how much you want to pay for the policy.
Is mortgage protection the same as life insurance?
Yes mortgage protection insurance is a form of life insurance that has been badge in such a way as it makes clear what the intention of the policy is to do – pay off your mortgage when you die. The duration of a mortgage life insurance policy is usually for the length of the mortgage – makes sense! It’s worth noting that the pay-out don’t have to be the same as the mortgage – it can be more if you want to leave some extra money to make your loved ones life as comfortable as it can be.