Life insurance is often referred to as Mortgage Insurance when it's purpose is perceived to protect dependent survivors against the death of a person paying off a mortgage. Most persons buying Mortgage Insurance usually hear this term for the first time when they have just entered into a mortgage loan agreement with a lending institution and the lending institution recommends that Mortgage Insurance be purchased from them. What is offered for sale by the lending institution is reducing term life insurance with a death benefit reducing to zero over the life of the outstanding mortgage. For example, if the outstanding mortgage were $200,000, payable over 20 years, the mortgage insurance should match the reducing balance of the mortgage over 20 years. You should note, however, that the cost of this coverage at your lending institution does not become less as the outstanding mortgage becomes less.

Mortgage reducing term insurance is sold by lending institutions in the form of group insurance, using life insurance companies to underwrite the risk. After answering minimal qualifying medical questions about yourself, a decision is rendered as to whether or not you qualify for coverage. There is some suggestion that more strict scrutiny of your initial application will take place at time of death claim so the onus falls upon the applicant of full disclosure of state of health at time of application. You don't receive a policy contract. You simply receive a certificate referring to a master group insurance contract, which outlines your specific benefits and cost. It also means that coverage is not guaranteed and all policyholders can be cancelled by the insurance company or the lending institution at any time if the risk to them becomes too great. If you want reducing term insurance,

Mortgage insurance purchased through the lending institution is not portable. If you sell your home and buy another or if you simply re-negotiate your mortgage for a new term, you will have to re-qualify for new mortgage insurance. Maybe you won't be able to qualify because your health has changed. Most homebuyers today are not living in the same house for the rest of their lives. You might end up buying two or three or more homes in your lifetime. The likelihood is that subsequent purchases will be more expensive than the first and therefore additional insurance protection will be required. It is therefore in your best interest to purchase a level or increasing death benefit during your earning years.