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The old adage goes, “Prepare for the worst, hope for the best.” And that adage definitely applies to insurance. While almost everyone is familiar with homeowners or hazard insurance, many may not be familiar with mortgage protection insurance. Mortgage protection insurance ensures a homeowner’s family has the money they need to pay off the home loan if the homeowner dies before the loan is satisfied. This means a family can stay in their home, removing a major element of instability and uncertainty in what is already a stressful time for a family.
Mortgage protection insurance coverage typically lasts from 10 to 40 years, matching the loan terms of the mortgage. Whereas life insurance pays out a lump sum of cash that can be applied to any expense, mortgage protection insurance is exclusively for paying off a mortgage. The beneficiary is the mortgage lender, not the family, so the insurance funds are applied to the remaining balance on the loan. Finding the best mortgage protection insurance company is essential to making sure the home loan is paid as agreed, so the family has the security of knowing they won’t have to leave their home.
- BEST OVERALL: Legal & General America
- BEST FOR OLDER CUSTOMERS: Globe Life
- BEST GUIDED PROCESS: Northwestern Mutual
- BEST FOR MILITARY MEMBERS: USAA
What to Consider When Choosing the Best Mortgage Protection Insurance Company for You
When shopping for the best mortgage protection insurance, it’s important to review all the coverage and term options, as well as what is required when it comes to filing a claim. Look for a company with a high AM Best rating, which means the company has the financial strength to pay customer claims as promised. Keep the following factors in mind when searching for a policy.
Mortgage Protection Insurance vs. Life Insurance
Mortgage protection insurance provides funds to pay off the remaining balance of a home loan, with the money going directly to the mortgage lender. Life insurance pays benefits directly to the insured’s beneficiaries, who can then use those funds to pay off the mortgage loan as well as any other expenses. Many experts recommend choosing term life insurance with a death benefit that matches the mortgage balance instead of mortgage protection insurance. For homeowners who are in good health, term life insurance would be the better option. However, for homeowners who may have trouble qualifying for term life insurance, including those in poor health, those who have pre-existing conditions, or those who are older, mortgage protection insurance could provide the funds necessary to pay off a home loan.
Coverage and Term Options
Coverage under the best mortgage life insurance is typically limited to the mortgage loan’s principal and interest. It does not cover other home-related costs like homeowners insurance, property taxes, and homeowners association (HOA) fees. Some of the best mortgage insurance companies may offer optional coverage to pay these costs. Term options for mortgage protection insurance usually match the term amount on the mortgage. So for a 20-year mortgage, the term for the mortgage protection insurance is also 20 years. Once the mortgage is paid in full, the mortgage protection insurance is no longer necessary, so the policy expires.
Quote Process
When consumers are shopping for the best mortgage insurance, mortgage protection insurance companies typically will ask for the homeowner’s age, the amount of the mortgage, and the loan term on the mortgage. However, unlike with life insurance policies, most mortgage protection insurance companies will not require a medical exam or even include any health questions. As a result, this could increase the odds of getting approved for mortgage protection insurance, even for those in poor health. It also could mean mortgage protection insurance is more affordable than life insurance because health is not a consideration as would be the case in pricing a life insurance policy.
Claims Process
Filing a claim for mortgage protection insurance varies a bit from filing a claim for life insurance. It will be necessary to provide documentation of the insured’s death to submit with the claim forms so the claim can be processed. Once the claim has been approved and processed, the family will not receive any funds. Instead, the funds will be directed to the mortgage lender to cover the mortgage loan balance. Only the amount owed on the mortgage loan will be paid out. There are no extra funds for property taxes, homeowners insurance, HOA fees, or other home-related expenses.
AM Best Rating
AM Best is a recognized and respected full-service credit rating agency that examines creditworthiness and other data on insurance companies worldwide. AM Best ratings measure a mortgage protection insurance company’s financial strength, a key indicator of the company’s ability to pay customer claims in a timely manner. When shopping for the best mortgage protection insurance companies, look for companies that have ratings of A or higher. Although there’s no guarantee that claims through companies that have high AM Best ratings will be paid out problem-free, these companies are less likely to default on paying out a claim.
Average Monthly Cost
The average monthly cost for the best mortgage life insurance depends on a number of factors, including the homeowner’s age and occupation, the home’s location, the mortgage balance, and the mortgage loan term. In most cases, the younger the homeowner is, the less the premium will be. Likewise, the lower the amount of the insurance coverage, the less the premium will be. Monthly premiums could be as low as $5.50 per month or as much as $75 per month, depending on the insurance provider and the other factors previously listed. It’s important to shop around with at least three different mortgage protection insurance companies to find the best carrier with the best rates.
Service Area
Because consumers are more likely to opt for insurance instead of mortgage protection insurance, many insurance companies do not sell this type of coverage. Therefore, it may be difficult to find mortgage protection insurance that covers mortgages where the homeowner lives. It’s important to ask every mortgage protection insurance company if it provides coverage in the area where the home is located. If not, move on to the next insurance company.
Death Benefit
With term life insurance, the insured pays for the same amount of coverage for the entire term of the policy. That means if they purchase $150,000 in coverage and the family files a claim following their death, the family will receive $150,000. With mortgage protection insurance, the death benefit declines alongside the mortgage balance. That means if the homeowner purchased the policy while there was a mortgage balance of $150,000 but died with a mortgage balance of $75,000, the mortgage protection insurance will only pay $75,000, even though the homeowner paid the same premiums for the life of the policy.
Policy Riders
Because mortgage protection insurance only covers the mortgage principal and interest, homeowners should check to see if the mortgage protection insurance company offers additional coverage for such home-related expenses as homeowners insurance, property taxes, and HOA fees. The mortgage protection insurance company also may offer a return of premiums rider, meaning the insured can receive the premiums they paid if they outlive the mortgage insurance. Keep in mind this type of rider can be relatively expensive. Another rider option would be for living benefits, wherein the insured could withdraw money from the policy’s death benefit should they be diagnosed with a terminal illness. It’s important to ask the mortgage protection insurance about any optional riders to get the right coverage for the policyholder and the family.
Our Top Picks
To find the best mortgage protection insurance companies, we looked for companies with high AM Best ratings, long loan terms, and easy quote and claim processes. These are our top picks for the best mortgage protection insurance.
Best Overall
Legal u0026 General America
- Term options: 10 to 40 years
- Quote process: Online, phone, or through an agent
- Claim process: Online or phone
- AM Best rating: A+
Pros
- Wide range of term options offered, including up to 40 years
- Same-day payments issued once the claim is approved
- Several riders available, including accelerated death benefit and coverage for children
- Customers with a family history of cancer may still qualify for some coverage
Cons
- Policy must be purchased through a licensed agent
Why It Made the Cut: Legal & General America offers high coverage limits and same-day payments, and it has a selection of available riders, making it an excellent pick for most customers. Legal & General America offers a selection of loan terms, including up to 40 years, so it’s easier for homeowners to get the length of coverage they need. In order to get all the coverage required, the company offers several riders, including an accelerated death benefit and coverage for children, both of which are unique among mortgage protection insurance policies. Potential customers can get a quote online, by phone, or through an agent, and they’ll have to purchase the policy through a licensed agent. And if it’s necessary to file a claim, the beneficiaries can do so online or by phone. Once the claim is approved, the company could pay out the benefit on the same day. Legal & General America may even offer some coverage for insureds who have a history of cancer in the family, which is a standout feature that can bring many customers peace of mind.
Best for Older Customers
Globe Life
- Term options: The length of the mortgage
- Quote process: Online, phone, or through an agent
- Claim process: Online or mail
- AM Best rating: A
Pros
- Guaranteed acceptance for customers ages 18 to 69
- No medical exam required in order to qualify
- Coverage options start at as low as $50,000
- 30-day money-back guarantee offered after sign-up
Cons
- Discount or pricing information not readily available
Why It Made the Cut: Globe Life does not require a medical exam, which makes it a solid pick for those who may not qualify for traditional term life insurance. The only actual mortgage protection insurance provider in our comparison, Globe Life offers guaranteed acceptance for customers ages 18 to 69 for the entire length of the mortgage. Because there’s no medical exam to qualify, it could be a good choice for customers with complex health issues or those who are in high-risk occupations who have difficulty qualifying for life insurance. Discounts and pricing information are not readily available, but coverage starts at $50,000, which is lower than many other policies. This makes Globe Life a good pick for homeowners who may not need a lot of extra coverage. And, for customers who change their minds, Global Life offers a 30-day money-back guarantee.
Best Guided Process
Northwestern Mutual
- Term options: 10 to 20 years
- Quote process: Phone
- Claim process: Online or phone
- AM Best rating: A++
Pros
- Custom life insurance quotes provided based on personal details
Cons
- Medical exam requirement information not readily available
- Financial adviser participation may delay quote process
Why It Made the Cut: Northwestern Mutual allows customers to get a tailored policy that fits their needs instead of a cookie-cutter policy. Using the insured’s personal data, Northwestern Mutual will customize a policy that fits a homeowner’s needs so they don’t pay for unnecessary coverage. Also, with its A++ AM Best rating, Northwestern Mutual is well situated to pay out customer claims in a timely manner, which adds to the company’s qualities as a good choice. There’s limited information on the medical exam requirement, and a customer will have to work with a Northwestern Mutual financial adviser in their area to get a quote and a policy. But customers are able to file claims both online and by phone.
Best for Military
USAA
- Term options: 10 to 30 years
- Quote process: Online or phone
- Claim process: Phone
- AM Best rating: A++
Pros
- Prices typically fall below the national average, making coverage more affordable than that of some competitors
- Military-related benefits are designed for service members and their families
Cons
- Coverage is only available for members of the military, veterans, and qualified family members
Why It Made the Cut: USAA offers affordable rates, plus it offers term life coverage that takes things like military deployment and relocation into account. While USAA is only available to members of the military, veterans, and family members, it’s a standout choice for those who qualify. Offering coverage for loan terms from 10 to 30 years, USAA insurance policies are often the most affordable among its competitors, with rates less than the national average. Because USAA is for active and former members of the military and their families, benefits are geared to their specific needs. This includes extra protection for members on deployment, coverage during war, coverage to help with serious injury, and guaranteed coverage for members following their military service.
Our Verdict
Legal & General America is our best overall pick thanks to its high coverage limits and wide range of loan terms. It also offers same-day payouts, which can be a huge relief to family members. We also rate Globe Life as a solid choice for older customers or those with health complications because it offers guaranteed coverage for those who may not qualify for traditional term life insurance.
How We Chose the Best Mortgage Protection Insurance Companies
When researching the best mortgage protection insurance companies, we discovered many companies do not offer mortgage protection insurance and instead recommend term life insurance. Therefore, we looked for companies that offered coverage for a wide range of customers, including those who are in poor health or who are older and may have trouble qualifying for term life insurance. We also only considered companies that offered services in most (or all) states and offered long-term loan policies that could cover the length of a typical mortgage. We also looked for companies highly rated by AM Best, which indicates the company has financial strength and can deliver on customer claims.
Before You Choose One of the Best Mortgage Protection Insurance Companies
As with all types of insurance, mortgage protection insurance is not always the right choice for every consumer. And not every mortgage protection insurance company is going to be right for every consumer, because everyone has different wants and needs from their insurance coverage. First, customers should confirm that mortgage protection insurance is going to offer exactly what they need and that they’re not better off opting for term life insurance. After making this decision, it’s imperative to shop around and compare mortgage protection insurance policies and companies. Researching several mortgage protection insurance companies ensures customers find the right company and insurance that best fits their needs. It does take time, but this is a crucial step before purchasing any mortgage protection insurance. Just like when shopping for homeowners insurance, talk to at least three different mortgage protection insurance companies before buying a policy.
Cost of Opting for One of the Best Mortgage Protection Insurance Companies
The cost of mortgage protection insurance will vary depending on how much a homeowner’s mortgage is. Customers can expect to pay an average of $50 per month, but some monthly premiums could be as low as $5.50. Conversely, the average monthly cost of life insurance is $27.
Buying mortgage protection insurance from one of the best mortgage protection insurance companies may not be the right choice for every homeowner. It’s important to compare policy coverage and rates for each of the best mortgage protection insurance companies to see which one could provide the right coverage. Customers may also need to look at life insurance coverage rather than mortgage protection insurance. Don’t rush into making a purchase; instead, take time to research these policies to make an informed decision.
The Advantages of Opting for One of the Best Mortgage Protection Insurance Companies
Mortgage protection insurance can provide funds to pay off the mortgage if the insured dies, leaving the family with the security of not having to leave their home. Many mortgage protection insurance policies will cover the length of the mortgage loan so there’s no doubt the mortgage will be paid. Plus, because there’s usually no required medical exam, it could be a good option for customers with health problems who have trouble qualifying for life insurance policies.
- Mortgage protection insurance pays off the mortgage balance if the insured dies.
- Medical exams are typically not required.
- Some policies have terms for as long as 40 years.
FAQs
Researching and shopping for mortgage protection insurance can be confusing because many homeowners are not familiar with this type of insurance. It’s important to take the time to research this insurance coverage in order to get the right protection needed for the family. It’s possible life insurance may make a better choice than mortgage protection insurance.
Q. What type of insurance would be most suitable for mortgage protection?
Mortgage protection insurance is guaranteed coverage for paying off a mortgage, but life insurance could be a better investment. Homeowners will want to research different companies’ qualifications for both types of insurance and obtain quotes to see which option is best.
Q. What is the average cost of mortgage protection insurance?
Monthly premiums could be as low as $5.50 per month or as much as $75 per month, depending on the insurance provider and other factors. The average monthly cost is $50.
Q. Can a 60-year-old get mortgage protection insurance?
There are mortgage protection insurance companies that provide coverage for customers up to 69 years of age.
Q. Do I need mortgage protection insurance?
Mortgage protection insurance provides funds to pay off a mortgage should the insured die, relieving family members of this financial burden. Also, mortgage protection insurance is a good option for those who have trouble qualifying for life insurance.
Q. What’s the difference between mortgage protection insurance and PMI?
Mortgage protection insurance pays your mortgage balance if you die. Private mortgage insurance (PMI) protects the lender if you default on your mortgage loan.
Q. Is mortgage insurance tax deductible?
Premiums for mortgage protection insurance usually are not tax deductible.
Q: Can I deduct mortgage interest in 2023?
Yes, you can deduct mortgage interest in 2023 on the first $750,000 of the mortgage. If you purchased your home before Dec. 15, 2017, that amount goes up to $1 million.