Jargon Buster - Definition of Mortgage Life Insurance
Please select your letter of choice below to see the list of terms:
- Mortgage Life Insurance
is an insurance policy which pays off the outstanding balance owed on a mortgage in the event of the death of the borrower(s). It is a term policy and therefore only provides cover for a set number of years, usually the length of the mortgage.
It is important to remember that mortgage life insurance can be setup with either a decreasing or level benefit. Decreasing cover refers to a sum assured which decreases each year and should therefore provide enough to pay off a repayment mortgage (Capital and Interest). On the other hand if you have an interest only mortgage, a decreasing policy would not provide enough cover as each year your sum assured would drop, in this event you should take a level term life insurance policy to ensure that the full balance of the mortgage is covered.
Under normal circumstances the policy is setup to pay out directly to a family member or to your estate. It is however possible to have the policy pay to your bank or building society, this is less common and certain forms must be completed with the lender to allow this.
Please note that all definitions are intended for general guidance only. For official and current definitions you should always double check your policy wording.
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