The short answer
You may not need separate mortgage protection if your current life insurance is large enough to cover the mortgage plus your family's other needs, and lasts until the loan is paid off. Group coverage through work often falls short or ends when you change jobs. If you find a gap, a separate term policy can fill it.
This guide answers the most common questions about do i need mortgage protection if i have life insurance.
If you already have life insurance, you might not need a separate mortgage policy. Or you might find your current coverage falls short once the mortgage is counted.
This guide shows how to compare your needs with your coverage in a few minutes.
Part of our complete guide: Mortgage Protection Insurance: The Complete Guide.
Quick answer
Mortgage protection is life insurance used for a specific job. Group life at work often ends when you change jobs. If there is a gap, a second policy is often simpler than replacing the first.
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Do I need mortgage protection if I have life insurance?
Group life through work is a great benefit, but it is often a set multiple of salary and it usually stays with the job. A mortgage stays with you.
Look at what you have today and when it ends. If it covers the mortgage plus your family's other needs for as long as they need it, you may not need more. If not, an individual term policy sized to the gap is a simple fix.
We cover this in detail in How Does Mortgage Protection Insurance Work?. We cover this in detail in Mortgage Protection Insurance Cost: What Sets Your Price.
How much coverage do you need?
A simple way to size coverage is to add up what your family would need to pay off or replace. Some agents call this the DIME method:
- Debt. Car loans, credit cards and other balances.
- Income. Years of income your family would need to replace.
- Mortgage. The balance on your home loan.
- Education. Future school costs for your children.
Subtract savings and any coverage you already have, such as a group policy through work. What is left is a reasonable target. You do not have to cover everything with one policy, and it is fine to start with the most important need.
Compare rates from several carriers in about two minutes. Free, no obligation.
One policy or two?
If you already have a policy, you can add a second one just for the mortgage. The two pay out independently. This avoids cancelling an older policy that may have a better rate because you bought it younger.
How long should the policy last?
Think about two dates: when your mortgage will be paid off, and when your family would no longer depend on your income. The policy should usually last until the later of the two.
Many homeowners pick a 20- or 30-year term at closing. If you bought years ago, a shorter term may match what is left. Some people stack two policies, a longer one for income and a shorter one for the loan, so coverage drops as needs drop.
Can you turn term into permanent coverage?
A conversion privilege is one of the most valuable features a term policy can have. It lets you trade term coverage for permanent coverage later, with no new health questions, within a set window.
- Cutoff. Conversion is usually allowed until a certain age or policy year. Know the date.
- Partial conversion. Many policies let you convert part of the amount and keep the rest as term.
- Cost. Permanent coverage costs more, and the rate uses your age at conversion.
How to get covered in 3 steps
- Check your rate. Pick your state and answer a few quick questions about the coverage you want.
- Compare carriers. A licensed agent compares mortgage protection options from several insurers and explains the trade-offs.
- Apply and get covered. Many applications take one phone call. Coverage starts once the policy is issued and the first premium is paid.
Level vs. decreasing coverage
Mortgage protection comes in two main shapes. With level term, the benefit stays the same for the whole term. With decreasing term, the benefit drops over time, roughly in step with your loan balance.
| Feature | Level term | Decreasing term |
|---|---|---|
| Benefit over time | Stays the same | Goes down |
| Price over time | Usually level | Usually level |
| Left over after the loan is paid | Often money left for your family | Little or nothing |
| Best for | Mortgage plus other needs | Covering the loan balance only |
Many people pick level term. The price difference is often small, and your family keeps any money beyond the loan balance.
Is mortgage protection right for you?
Often a good fit
- Homeowners whose family depends on their income to make the mortgage payment. Couples who need both incomes. Single parents. Anyone with little or no other life insurance. Self-employed owners without group coverage.
Maybe not the right fit
- People whose existing life insurance already covers the mortgage and other needs. Homeowners with a small balance and plenty of savings. Households where no one depends on the income that pays the mortgage.