In real estate finance, mortgage life insurance is a form of term life insurance written in an amount equal to the declining balance of a loan secured by a mortgage or deed of trust. As the loan balance is reduced over time, the amount of insurance coverage decreases accordingly.
The beneficiary of a mortgage life insurance policy is the mortgagee, or lender. If the insured borrower dies during the term of the policy, the remaining balance of the mortgage is paid in full, thereby satisfying the debt and preventing the obligation from passing to the borrower’s estate or survivors.
