Life Insurance provides mortgage protection
There are several reasons why mortgage companies like customers who take out life insurance, and why some mortgage companies insist on customers taking out life insurance alongside their mortgage. Life insurance will provide a payout which will pay off a mortgage, in full, leaving the customers family owning the home. It also avoids some potential increasingly difficult situations, for both the family concerned and the lender.
One particular situation that regularly happens will see a customer die without life insurance, leaving his family unable to afford the mortgage. They then fall further and further into arrears, with the mortgage company then having to add to their heartache of losing a family member by taking away their home as well.
For the mortgage lender, the home they then repossess could be in a bad condition, or could have lost value with standard housing market fluctuations, and they may find they end up selling at a loss, losing money in the process. With life insurance, they know they will be paid the remainder of the mortgage in full, so they don’t lose any money, and the family have a house to live in, fully paid off.