In mortgage life and disability insurance, how does coverage change as the principal balance declines?

In mortgage life and disability insurance, the coverage is designed to correspond with the outstanding balance of the mortgage loan. As the borrower makes payments on the principal, the balance they owe decreases. Consequently, the amount of insurance coverage provided by the policy also decreases to match the lower principal balance. This structure ensures that the policy is cost-effective and provides only the necessary coverage to pay off the remaining mortgage in the event of the borrower's death or disability.

This approach aligns with the overall purpose of mortgage insurance, which is to protect the lender against the risk of default while also providing financial security for the borrower's family. Keeping the coverage in line with the declining mortgage balance means that the insurance will adequately cover the loan amount without being excessive or unnecessarily costly for the policyholder.