mortgage protection policy
Quick Summary
A mortgage protection policy is a type of life insurance designed to cover the outstanding balance of a mortgage loan. This policy is typically a combination of whole life insurance and decreasing term insurance. The decreasing term insurance component is structured to decline in value over time, mirroring the reduction of the mortgage balance as payments are made. This ensures that if the insured passes away, the remaining mortgage debt is paid off, protecting the homeowner's family from losing their home.1
It is important to distinguish this from mortgage insurance, which protects the lender against loss if the borrower defaults on payments. Mortgage redemption insurance is another term for this type of life insurance that pays off the remaining mortgage balance upon the insured's death. A mortgage itself is a loan used to purchase a home, with the property serving as collateral until the loan is repaid.234
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