The short answer
Mortgage protection when you refinance is simpler than most people expect, as long as your coverage is a policy you own. The policy is tied to you, not to the loan.
This guide covers refinancing, selling and buying again, and what to do if your new loan is bigger than the old one.
Part of our complete guide: Mortgage Protection Insurance: The Complete Guide.
Quick answer
A term policy you own stays in force through a refinance or move. Lender-sold mortgage life often ends with the original loan. Bigger loan? Add a small second policy instead of replacing the first.
MarketView Agency is an independent insurance agency (National Producer Number 18345705).
On this page
- Mortgage protection when you refinance: what happens when you refinance or move?
- Mortgage protection and refinancing: why a lender's policy is different
- One policy or two?
- How long should the policy last?
- Who gets the money: naming beneficiaries
- Who mortgage protection is for (and who it isn't)
- Frequently asked questions
Mortgage protection when you refinance: what happens when you refinance or move?
If your mortgage protection is a term life policy you own, refinancing or moving does not change it. The policy is tied to you, not to the loan or the house.
- Refinance: your policy stays in force. If the new loan is larger, you can add a second policy for the difference.
- Sell and buy again: the policy keeps going and can protect the new mortgage.
- Pay off early: keep the policy for your family, or reduce the amount if your carrier allows it.
Lender-sold mortgage life insurance is different. It often ends when the original loan is paid off or refinanced. Check before you refinance.
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.
Mortgage protection and refinancing: why a lender's policy is different
Some lenders and banks offer mortgage life insurance at closing or by mail. It can be convenient, but read the details.
| Feature | Lender mortgage life | Individual term policy |
|---|---|---|
| Beneficiary | Often the lender | Your family |
| Benefit over time | Often shrinks with the loan | Usually level |
| If you refinance or move | Often ends | Stays with you |
| Underwriting | Often limited questions | Full or simplified, varies |
| Shopping | One option | Compare several carriers |
An individual term policy you own is usually more flexible. You choose the beneficiary, the benefit does not drop with the loan, and the coverage follows you if you sell or refinance.
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.
Who gets the money: naming beneficiaries
The beneficiary designation decides who receives the money and how fast. A clear designation lets the insurer pay without waiting on probate court.
Most people name a spouse or partner as the primary beneficiary and their children or a trust as contingent beneficiaries. If you name children who are still minors, think about a trust or a custodian. Without one, a court may need to appoint someone to manage the money until they come of age.
Tip: Update your beneficiaries when life changes. A policy that still names a former spouse can pay that person, even if your will says otherwise.
You can usually change a revocable beneficiary at any time with a simple form. An irrevocable beneficiary must agree to changes, so use that option only with a clear reason, such as a divorce agreement.
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.
Who mortgage protection is for (and who it isn't)
Often a good fit
- a mortgage that depends on your income, kids at home, a partner who could not cover the payment alone.
- new homeowners who want to lock in today's age.
Maybe not the right fit
- your current coverage already pays off the home and covers living costs.
- the home is nearly paid off and savings could finish it.