Which type of insurance is designed specifically to cover loans such as mortgages?

Decreasing Term Insurance is specifically designed to cover loans such as mortgages. This type of insurance provides a death benefit that decreases over time as the outstanding balance of the loan is paid down. Since mortgage debts typically decrease over the life of the loan, decreasing term insurance aligns perfectly with this structure, ensuring that the coverage fits the declining amount owed.

In the context of a mortgage, if the borrower passes away, the decreasing benefit can help ensure that the remaining mortgage balance is covered, providing financial security for beneficiaries and preventing them from inheriting debt.

Other types of insurance, such as Universal Life and Whole Life Insurance, have different purposes. They are primarily designed for long-term financial planning, savings, or investment rather than specifically addressing a decreasing loan balance. Increasing Term Insurance, on the other hand, offers a death benefit that grows over time, which may not be appropriate for covering a loan that reduces in size. This highlights why decreasing term insurance is the most suitable choice for mortgage protection.