Jeff is a well-known speaker and expert in life insurance and financial planning. He has been featured and quoted in Nerdwallet, Bloomberg, Forbes, U.S. News & Money, USA Today, and other leading finance websites. He is a licensed life insurance agent and has helped over 3000 people secure life insurance. He is licensed in all 50 states & DC. Jeff has spoken at top insurance conferen...

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Written by Jeff Root
Licensed Life Insurance Agent Jeff Root

Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent Benji Carr

UPDATED: Jun 28, 2022

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Mortgage protection life insurance is an important financial planning tool that allows families to stay in their homes after a loved one dies.

Most homeowners understand having life insurance is important to protect the family when they are gone. Most homeowners also want to make sure their homes are safe should they die unexpectedly.

Most people do not have enough life insurance to replace their income and pay off their house when they die. As a result, most families must sell their homes within one to two years following the death of an income-producing spouse or partner.

What is mortgage protection insurance?

Mortgage protection insurance is a type of life insurance policy designed to pay off the house, pay down the mortgage balance, or make mortgage payments for the surviving family members.

Most families and couples who own homes require two incomes to afford, maintain, and make payments on their home mortgage.

When a loved one dies unexpectedly, the household income is often drastically reduced, leaving only one income-producing spouse or partner to make all the payments.

Example: If Bob and Mary both earned $50,000 a year to have a household income of $100,000, by the time they make the mortgage payment, make monthly payments on both car loans, pay the homeowners insurance and automobile insurance, pay off the credit card bill, pay off the medical expenses, and pay all other bills, there’s little money left at the end of the month.

One day, Bob was driving home from work and was involved in a fatal automobile accident. Bob had work life insurance, a type of insurance that paid one year’s worth of his salary ($50,000) to Mary. With a $175,000 mortgage, the $50,000 from Bob’s work life insurance didn’t come close to paying off their home.

The $50,000 in work life insurance from Bob’s employer would only replace Bob’s income for one year. This would give Mary and their children time to hold off the bill collectors and sell the home, so the bank did not start the foreclosure process.

Bob and Mary had always dreamed of getting their home paid off. They would’ve accomplished this goal if Bob hadn’t passed away, but life does not always go as planned. 

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Why is mortgage protection Insurance important?

For many, owning a home is part of the American dream, and losing a home is part of the American nightmare.

Mortgage protection life insurance is a life insurance policy designed to protect the home when a loved one suddenly passes away.

Life Insurance vs. Mortgage Protection Insurance

Most life insurance policies require a physical examination (blood test, urine test, height and weight measurement, blood pressure test, medical questions etc.).

Mortgage protection policies are often “non-medical” policies that require no physical examination. A homeowner must complete an application and answer simple medical questions to qualify.

Once the application is submitted, the life insurance company underwriters will either approve or decline the policy.

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More people will qualify for mortgage protection insurance than traditional life insurance. Mortgage protection is intended to pay off, pay down, or make mortgage payments for you. Because of this, there are many mortgage protection plans available to you.

If you are very sick, have life-threatening diseases, or any other significant medical impairments, you will often be denied traditional life insurance policies. Mortgage protection policies allow approval for applicants with a broad range of physical or medical impairments.

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More to Know About Mortgage Protection Insurance

Bob and Mary both own traditional life insurance policies. For either to get the life insurance money they purchased, one of them would have to pass away.

Example: Let’s imagine Bob is diagnosed with cancer.

Thankfully, Bob has excellent medical insurance through his employer and takes advantage of all medical treatments to cure cancer. Despite the best medical technology and medicine available, Bob’s cancer continued to get worse, and he was eventually diagnosed with terminal cancer; Bob’s doctors say he has less than 12 months to live.

Bob became weakened to where he cannot work. Because Bob cannot work, the financial protection of his income stops.

Because Bob and Mary both earned $50,000 a year, their household income had been $100,000. With Bob unable to work, they must now live on one income. Because Bob is no longer employed, they must now pay their medical bills without health insurance.

Within a few short months, Bob and Mary’s savings had been exhausted, and they were relying on credit cards to pay daily living and medical expenses.

When Bob was working, he had an employer-provided life insurance policy. This policy is gone now that Bob is no longer working.

Unable to make their mortgage payments, Bob and Mary are forced to sell their home and move into a small bedroom at Mary’s parent’s house. The medical bills keep piling up, and Mary will be left with a mountain of debt even after Bob dies.

Most mortgage protection policies include a “terminal illness” benefit that would pay out funds from the policy should somebody be diagnosed with a terminal illness resulting in less than 12 months to live. This would have allowed Bob and Mary to pay off their home and other expenses when Bob was diagnosed with cancer.

Many mortgage protection policies also include disability benefits that will pay the insured if they are disabled and unable to work.

Some mortgage protection policies include benefits should you be diagnosed with cancer, heart disease, stroke, or other significant medical problems that lead to poor health.

A Summary of Mortgage Protection Insurance

Who gets the mortgage protection money when I die?

When you purchase a mortgage protection insurance policy, you decide who the beneficiary will be.

This is very important, as you don’t want the bank to be the beneficiary of your mortgage protection life insurance policy.

If you die, you want the mortgage protection insurance money to go to your spouse, partner, or children.

The money is paid out tax-free.

What happens when I sell my house?

In the past, many people purchased mortgage protection life insurance when they financed their homes. It was a feature offered in the financing process. Those policies are no longer available…and with good reason.

With the old mortgage protection policies, if you ever sold or refinanced your home, your mortgage protection policy was terminated.

If your health changed, you would likely not be eligible for this protection. They also became more expensive as you age.

Mortgage protection policies are portable. If you sell your home and move into another one, your mortgage protection policy can be applied to your new home mortgage.

If you refinance your mortgage, your mortgage protection policy will remain unaffected, and your home will be protected even with the new lender.

Must I use my mortgage protection to pay off my mortgage loan?

Mortgage protection is designed to protect your home. Mortgage protection insurance keeps you in your home when the worst happens.

If you are diagnosed with a terminal illness, you can receive your mortgage protection funds if diagnosed with less than 12 months to live. You can use these funds to help pay medical bills and replace the income that would normally result in a family losing their home.

Any remaining funds after paying medical bills and replacing income can be used to pay off or pay down any remaining mortgage debt.

If you had a $150,000 mortgage and a $150,000 mortgage protection policy, this would pay off your home should death occur.

If you are diagnosed with a terminal disease and had $50,000 worth of medical bills and lost wages, you could use $50,000 of your mortgage protection policy to offset these medical costs.

When the partner or spouse with a terminal disease died, this would leave you $100,000 ($150,000 minus $50,000 medical bills and lost wages) to pay down your home mortgage.

You could then refinance the remaining $50,000 mortgage loan and have an affordable mortgage payment that would allow you and your family to stay in the home on one income alone.

I have PMI insurance, is my home protected?

Private Mortgage Insurance (PMI) is required when you don’t put 20% down on a home purchase. If you bought a $100,000 home with a $10,000 down payment, you would have to have PMI until your home loan was paid down to $80,000.

PMI is insurance that only protects the bank should you stop making payments and default on your loan.

PMI insurance provides a 20% cushion (because he did not put twenty percent down as a down payment) to the bank to cover the costs of foreclosing and selling your home.

PMI only protects the bank; it does not protect you and your family should a fatality or medical emergency occur.

I already have life insurance; do I need mortgage protection life insurance?

Congratulations on understanding the importance of mortgage protection life insurance in making this investment! However, most people don’t have enough life insurance to replace income when they are gone and pay off their mortgage.

Most people severely underestimate how much money it will take to pay off their mortgage and allow their surviving spouse and loved ones to survive when they are gone.

If you think you have enough life insurance, you probably don’t. Most people don’t realize they didn’t have enough life insurance until it’s too late.

Most widowers do not remarry for 8 to 10 years. This is a long time for a surviving spouse to “make it” while paying the mortgage, raising children, and handling all the other financial difficulties that will occur in the next 8 to 10 years.

What about those mortgage protection letters I keep getting in the mail?

After you purchase, refinance, get a home equity line of credit (HELOC), or do a reverse mortgage, your lender must file paperwork in your county courthouse that becomes a public record. Many large life insurance companies purchase these records and sell them to individual life insurance agents.

Many large multi-level marketing (MLM) insurance companies purchase your records and sell them to their life insurance agents. National Agents Alliance, Symmetry Financial Group, Equis Financial, and Asurea are just a few.

To find out more about these groups you can Google: National Agents Alliance Review, NAA Review, Symmetry Financial Group Review, Equis Financial Review, and Asurea Review

Most MLM companies specialize in “recruiting” new and inexperienced agents; the insurance agent who comes to your home may have not even sold their first mortgage protection or life insurance policy

Because many agents are new to the insurance business, they are encouraged to sell mortgage protection life insurance policies with relaxed qualification criteria.

These relaxed qualification life insurance policies protect your home but can be some of the most expensive mortgage protection policies available. We have special relationships with the most affordable mortgage protection life insurance companies.

Should I fill out that letter I received in the mail?

It’s important to understand when you mail a letter, your personal information will be sold.

Many MLM mortgage protection companies will sell your personal information to up to six agents over the coming years. This means your phone may ring for the next 2 to 5 years with agents trying to sell you mortgage protection life insurance.

If you value your privacy and don’t want your information sold, complete our quote form on this page, and we will help you understand if mortgage protection is right for you, and most importantly, we will respect your privacy and never sell your personal information.

What should I do if I want to protect my home?

You can start by filling out the mortgage protection free quote form on this page to get an idea of what your mortgage protection policy may cost.

Your information will remain confidential, and you will bypass the hassles of receiving phone calls for the next several years if you had mailed in that mortgage protection letter.