No. They can do the same job, paying off the house if you die, but they go about it differently.
| Mortgage protection | Term life | |
|---|---|---|
| Who gets the money | The lender | Whoever you name |
| How much it pays | What’s left on the loan, so it shrinks every year | The full amount for the whole term |
| What it can be used for | The mortgage | Anything your family needs |
| Health questions | Few or none | Usually yes |
That second row is the one to notice. With mortgage protection your payment usually stays the same while the payout gets smaller as you pay down the loan.
Term life leaves the choice with your family. They could pay off the house, or keep the mortgage and use the money for income, childcare, or college. For a healthy person it’s often the less expensive of the two, and we looked at how term prices out next to whole life.
When mortgage protection makes sense. If your health makes regular life insurance hard to get, a policy with few questions may be the one you can actually buy. Coverage you can get beats coverage you can’t.
Don’t mix it up with PMI. Private mortgage insurance protects the lender if you stop paying. It does nothing for your family if you die.
Most people who ask us this end up matching a term policy to the mortgage, a 30 year term for a 30 year loan. Our page on Boulder term coverage shows how that looks with local home prices. As brokers we can price both kinds next to each other, so you see the real difference before choosing.
Buying your first home is also when many buyers first think about this, which we wrote about in term coverage in your thirties.