Mortgage Life insurance is a form of life insurance specifically designed to repay your repayment mortgage if you were to die. Of course, it is not designed to repay any arrears if you get behind on your mortgage payments.
Mortgage Life insurance is not suitable if you have an interest only mortgage. (For interest only Mortgage protection you need to take out standard Life Insurance.)
When you have a repayment mortgage the value of your outstanding mortgage steadily decreases as your monthly mortgage repayments pay off both the interest and the capital you borrowed. Therefore, the level of life cover you need for a repayment mortgage decreases as time goes by.
To achieve this the insurance companies offer a special type of policy,
sold under the name of Mortgage Life Insurance, where the sum insured
decreases in line with the value of your outstanding mortgage. The life
company then sees to it that if there is a claim, the proceeds from the
policy are paid to your mortgage lender.
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