Does Homeowners Insurance Cover the Mortgage in Case of Death?

Quality homeowners insurance provides quite a bit in the way of protection against financial loss, both for the homeowner and the mortgage holder alike. Under the protection of a homeowners insurance policy, the structure itself is covered against financial loss suffered as a result of it being damaged or destroyed from a long list of perils. The contents found within the home are also covered against damage or destruction as well as theft or vandalism. With most homeowner’s coverage, even your personal possessions not in the home are covered. An example would be a camera that gets stolen while you’re on vacation away from home.

Another big benefit provided by most homeowner’s policies includes liability protection. If someone visiting your home gets injured and you’re charged with negligence you could be subject to paying attorney’s fees, court costs, medical expenses and payments levied in a judgement. A good homeowners insurance policy should help in paying these expenses. Many policies even pay a no-fault medical benefit if your friend or neighbor becomes injured in your home. In this case, they can simply submit their medical bills to your insurance company for payment without filing a liability claim against you.

What’s Not Covered?

Two perils not covered by a standard homeowner's policy include earthquake or flood damage. Both of these perils require specialized coverage specific to either earthquakes or floods and must be obtained separately from standard homeowner’s coverage.

Another situation not covered under your homeowners insurance policy is the payoff of your mortgage in case you die prematurely. There are, however, a number of other types of policies you can buy that will provide the money necessary to pay off your mortgage in the event of your death, each of which is some specialized form of life insurance. They include:

• Mortgage Protection Life Insurance – this is a relatively expensive form of decreasing term life insurance, the proceeds of which, in the event you die, is paid to your mortgage holder to pay off your loan. This may be your least favorable choice.
• Term Life Insurance – you can take out term life insurance for the same term length as your mortgage loan and, in the event of your death, your survivors have the option of spending the payoff money as they see fit, including paying off the home if that’s their choice. This policy provides your beneficiary the most flexibility.