Mortgage Life and Disability Insurance

Definition - What does Mortgage Life and Disability Insurance mean?

Mortgage life and disability insurance is insurance coverage provided to homeowners to pay their home mortgage in the event of their death or disability.

Justipedia explains Mortgage Life and Disability Insurance

Mortgage life and disability insurance can offer homeowners peace of mind knowing that if they are disabled or they die, their families will not have to struggle to meet the financial obligation of a mortgage payment. Mortgage life and disability is also generally offered without a full medical screening, making it easier to acquire than some life insurance policies.

Unfortunately, there are some downsides to purchasing mortgage life and disability coverage. First, mortgage life and disability can be expensive compared to other term life insurance options. It also provides a decreasing benefit with fixed premiums, even as the homeowner pays off their mortgage loan.

Finally, experts contend that it may be more beneficial for many homeowners to purchase a standard term life insurance policy, which provides a fixed payout at the time of death, rather than a payout tied to the mortgage balance.

By choosing a standard life insurance policy, the fixed payout would be paid to surviving family members who would receive an immediate cash benefit to use as they wish. Mortgage life and disability policies offer no cash payout to survivors, but only eliminate the mortgage obligation—an option that may be less helpful to surviving family members if they have other higher interest loans or expenses that they would rather pay than the mortgage.

Mortgage insurance and disability coverage could, however, be a perfect option of coverage for some individuals. For example, individuals who have severe health conditions that eliminate their options to purchase traditional term life insurance may find that mortgage life and disability insurance provides them with the perfect means to protect their families.

Additionally some homeowners, who have a very expensive mortgage, may also benefit from mortgage insurance and disability coverage, especially if they are in poor health.

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