Does Homeowners Insurance Cover the Mortgage If You Die?

According to the National Association of Insurance Commissioners, with an average annual premium of $1,173 for a homeowner's insurance policy across the country, you would expect the policy to cover anything that may happen to your property. Additionally, while insurance provides significant protection, it will not pay off your mortgage in the event of your death. Additional policies can be purchased to provide this coverage. Still, the best method to protect yourself may be to get a term life insurance policy that provides money in the event of your death that can be used for any purpose.

The homeowner's insurance policy does not pay off any remaining mortgage balances when the mortgage holder dies.

Damage to Your Residence

Homeowner's insurance covers the cost of repairing or replacing your home in the event of damage or destruction caused by an accident or other disaster, such as a storm. Additionally, the coverage offers funds to replace personal items inside your house if it is damaged or stolen due to a covered occurrence. The coverage may pay the current monetary value of your home and personal goods or the actual cost of replacing damaged property at current values. The policy's deductible reduces any payout at the event.

Coverage for Liability

Along with damage coverage, homeowner's insurance policies include personal liability coverage and defense against lawsuits. Suppose someone slips and falls on your property. In that case, your policy will cover the cost of any damages awarded and defend you in court up to the limits of your liability coverage. Personal liability coverage may also cover additional damages, such as those incurred due to an accusation of libel or slander.

Mortgage Protection Insurance

Mortgage life insurance may be offered as optional coverage by your mortgage company or other insurers, including your homeowner's insurance provider. These plans cover the remaining balance of the mortgage in the event of the mortgage holder's death. They are referred to as diminishing term policies because, as the value of the mortgage declines with payments, the policy pays less in the event of the insured's death. These policies are typically available regardless of the homeowner's health status and do not need you to answer health questionnaires or undergo a medical examination.

Protection Against Death

The majority of experts think that the best approach to ensure that funds are available to pay off a mortgage in the event of your death is to obtain term life insurance. The costs for this insurance are quite reasonable compared to the amount of coverage available. Additionally, if necessary, the cash may be used for other reasons. If you have health problems that make term life insurance too expensive or impossible to obtain, a mortgage life insurance coverage may make sense for you.