Can an existing life insurance policy be used to repay an outstanding mortgage loan?

Yes, the purchase of a new mortgage protection term insurance policy is usually not required by the lender.

An existing policy, either term or cash-value life insurance can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of the insured's death.

Although buying a Mortgage Protection Policy ties the hands of the beneficiary into paying the mortgage which might not be in their best interest, credit life insurance is frequently recommended in conjunction with taking out of an installment loan when purchasing expensive appliances or a new car, or for debt consolidation. ​

​Is credit life insurance a good buy? 

​No, credit life insurance is frequently more expensive than traditional term life insurance.

​Further, if you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, the purchase of credit life insurance is normally not advisable due to its relatively high cost.