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State Farm Mortgage Protection Insurance: How Mortgage Life Works and What to Check
State Farm mortgage protection insurance is its Mortgage Life policy: 15- or 30-year term coverage whose benefit declines after year five. What to check.
Reviewed by Brian Carrozzi
Founder, RestAssured · Licensed life insurance agent
Updated · How we write and review
Short answer: Yes, State Farm sells mortgage protection insurance. Its website describes a term policy called State Farm Mortgage Life insurance, with policy terms of 15 or 30 years and coverage you choose “based on your mortgage balance.” State Farm says the death benefit goes down after the first five years but never below 20% of the original amount, and it’s paid to your beneficiaries.
Does State Farm sell mortgage protection insurance?
Yes. State Farm’s Mortgage Life page carries the heading “Mortgage Protection Insurance Helps Cover Your Family’s Home” and invites you to “help protect your home and family with a State Farm® Mortgage Life insurance policy.” The page explains why: “your family probably depends on your income to help make the mortgage payments.”
State Farm lists the policy as issued by “State Farm Life Insurance Company (Not licensed in MA, NY or WI)” or “State Farm Life and Accident Assurance Company (Licensed in NY and WI),” both of Bloomington, Illinois.
How does State Farm Mortgage Life insurance work?
Here’s what State Farm’s own product page says:
| State Farm Mortgage Life insurance | |
|---|---|
| Policy type | Mortgage term life insurance |
| Term lengths | “Policy terms are available for 15 or 30 years” |
| Coverage amount | “You can choose the coverage you need based on your mortgage balance” |
| Death benefit over time | After the first five years, it “decreases over the life of the policy” but “will never be less than 20% of the original face amount of insurance” |
| Premiums | “Scheduled to be level for the life of the policy”; they “may be raised or lowered after you have had the policy for five years” but “will never exceed the maximum premiums stated in the policy” |
| Paying premiums | “Premiums can be paid monthly, quarterly, semi-annually, or annually” |
| Who gets the benefit | It “passes to your beneficiaries generally income tax-free” |
| Conversion | Can be converted to permanent coverage “any time the policy is in force — no matter what your state of health”; State Farm says “Conversion options may vary by state” |
Source: statefarm.com. State Farm says policies, riders and features “may not be available in all states” and that “A complete statement of coverage is found only in the policy.”
What riders does State Farm list for Mortgage Life?
State Farm lists three optional add-ons:
- Mortgage Life Rider: “Provides additional coverage with the same features as a Mortgage Life insurance policy.”
- Mortgage Life Rider (Additional Insured): “Provides coverage on another person with the same features as a Mortgage Life insurance policy.” State Farm says it can last “either 15 or 30 years.”
- Waiver of Premium for Disability: If the insured “becomes totally disabled (as defined in the policy) prior to age 60 for six continuous months,” State Farm says this rider “will waive future policy premiums as they become due” while the insured remains totally disabled. State Farm describes different rules for a disability that starts between 60 and 65, and says the rider ends at age 65 unless disability occurs earlier.
State Farm also notes limits on benefits “due to misrepresentations on the application or when death is the result of suicide in the first two policy years.”
How is this different from PMI or lender mortgage insurance?
They’re different products. The Consumer Financial Protection Bureau (CFPB) says private mortgage insurance is “a type of mortgage insurance you might be required to buy” on a conventional loan with less than 20 percent down, and that “PMI protects the lender—not you—if you stop making payments on your loan.” The CFPB adds that “PMI is arranged by the lender and provided by private insurance companies.”
State Farm Mortgage Life is a life insurance policy, and State Farm says the benefit goes to your beneficiaries. For a fuller comparison, see PMI vs. mortgage protection insurance.
There’s also credit life insurance, which can be offered with a loan. The Texas Department of Insurance (TDI) says “Credit life pays the balance of a loan if you die before the loan is paid off.” TDI adds, “If you already have life insurance, you might not need credit life,” and that instead “you can assign some of the death benefits to the lender to pay the loan balance.” The New York State Department of Financial Services (NY DFS) says, “Credit life insurance need not be purchased from the organization granting the loan.”
| PMI | Credit life | State Farm Mortgage Life | |
|---|---|---|---|
| What it is | Mortgage insurance on your loan (CFPB) | Life insurance tied to a loan (TDI) | Mortgage term life insurance (State Farm) |
| What it does | Protects the lender if you stop paying (CFPB) | Pays the loan balance if you die before it’s paid off (TDI) | Pays a death benefit to your beneficiaries (State Farm) |
| Who issues or arranges it | Arranged by the lender (CFPB) | Need not be bought from the lender (NY DFS) | Issued by State Farm Life Insurance Company or State Farm Life and Accident Assurance Company (State Farm) |
Who receives the money, and can they pay off the house?
State Farm says the death benefit “passes to your beneficiaries.” TDI explains that “Your life insurance company will make payments after your death to the person you name in your policy,” and “If you don’t name a beneficiary, or your beneficiary is dead, the company will pay the death benefit to your estate.”
If your plan is for that money to pay off the house, talk it over with your beneficiary and keep your designation up to date. For more, see what mortgage protection insurance is.
Is a decreasing benefit right for you?
NY DFS explains the two basic shapes of term coverage: “Under a level term policy the face amount of the policy remains the same for the entire period,” while “With decreasing term the face amount reduces over the period.” Of decreasing term, NY DFS says, “Often such policies are sold as mortgage protection.”
State Farm says its Mortgage Life benefit starts decreasing after the first five years, in a way “intended to behave like your mortgage,” with a floor of 20% of the original amount. As an example of the floor: on a policy with a $300,000 original face amount, 20% is $60,000. Ask State Farm for the benefit schedule so you can see the amount in each year and compare it with your own loan’s payoff schedule. See decreasing vs. level term for mortgage protection for the trade-offs.
What should you ask before buying State Farm Mortgage Life?
- Term vs. your loan. Terms are 15 or 30 years. Which one lines up with the years left on your mortgage?
- Benefit schedule. What will the death benefit be in each year after year five, and how does that compare with your expected loan balance?
- Premium guarantees. Premiums may change after five years. What’s the maximum premium stated in the policy?
- Issue ages and amounts. What ages and coverage amounts are available? State Farm’s page doesn’t list them.
- Conversion. What permanent policies can you convert to in your state, and at what premium?
- Riders. Do you want the Mortgage Life Rider, the Additional Insured rider or Waiver of Premium for Disability, and what do they add to the cost?
- Beneficiary. Who will receive the money? TDI says the insurer pays the person you name.
- Licensing and free look. TDI says, “Make sure the agent and company are licensed to sell insurance,” and that “Texas policies have a free-look period of at least 10 to 20 days.” Ask about the free-look period in your state.
The bottom line
State Farm Mortgage Life insurance is a 15- or 30-year term policy with coverage based on your mortgage balance. State Farm says the benefit decreases after year five but never below 20% of the original amount, premiums may change after five years up to a stated maximum, and the money goes to your beneficiaries. Unlike PMI, which the CFPB says protects the lender, it’s life insurance. Check the benefit schedule, maximum premium and term against your loan, and get quotes for the same coverage from more than one source; we don’t rank companies.
If you’d like to compare mortgage protection and term options for your age and loan, a licensed agent can go over them with you, with no obligation. Here’s how calling RestAssured works.
RestAssured is not an insurance company or an insurance agency; we connect callers with independently licensed insurance agents. RestAssured is not a lender and isn’t affiliated with any mortgage lender or servicer. RestAssured is not affiliated with State Farm. Product names are trademarks of their owners.
Frequently asked questions
Does State Farm offer mortgage protection insurance?
Yes. State Farm’s website describes a State Farm Mortgage Life insurance policy under the heading “Mortgage Protection Insurance Helps Cover Your Family’s Home.” It’s a term life policy with 15- or 30-year terms.
Who gets the money from State Farm Mortgage Life insurance?
State Farm says the death benefit “passes to your beneficiaries generally income tax-free.” The Texas Department of Insurance says a life insurance company pays the person you name in your policy.
Is State Farm mortgage insurance the same as PMI?
No. State Farm Mortgage Life is a life insurance policy. The CFPB says private mortgage insurance is arranged by the lender and “protects the lender—not you—if you stop making payments on your loan.”
Does the State Farm Mortgage Life death benefit go down?
Yes, after the first five years. State Farm says the death benefit, “which is intended to behave like your mortgage, decreases over the life of the policy,” but will never be less than 20% of the original face amount.
Can I convert State Farm Mortgage Life to permanent insurance?
State Farm says you can convert the policy to permanent coverage any time it’s in force, “no matter what your state of health.” It also says conversion options may vary by state, so ask what applies where you live.
Sources
- State Farm: Mortgage Life Insurance (Mortgage Protection Insurance Helps Cover Your Family's Home)
- CFPB: What is private mortgage insurance?
- New York State Department of Financial Services: Types of Policies
- Texas Department of Insurance: Life insurance guide
This article is for general education. Policy features, prices and eligibility vary by insurance company and state; your agent will explain the specific terms of any policy before you apply.