What is Mortgage Protection Life Insurance? Mortgage life insurance is insurance that the borrower purchases when mortgaging a home. This insurance is designed to protect the owner's investment in the property and to provide a pay off on the mortgage upon death. The surviving spouse or heir of the property is then not required to make the mortgage payments. You will opt for the policy and make monthly payments on the policy after you close on the house. The government regulates and has written rules that govern this industry. There are specified ways that the premiums can be collected and conditions for the dispersal of the funds.

The Electronic Code of Federal Regulations, section 2.3 states that employees, officers, or directors of mortgage life insurance distribution companies cannot claim a commission on the sale of the insurance if they have 10% or more investment in the company. The can manage the company, but not collect any commission or bonus for the insurance sale. Not only are they barred any benefit of the sale, but also they are barred for selling the policy for any benefit to themselves. They can only offer the product for sale based on the benefits the policy provide to the consumer and how the consumer will be protected by the insurance coverage.

The federal government requires that these providers be licensed. The prospective provider must take classes to educate themselves about the insurance product they are selling and the insurance industry in general. After classes are over the student will be tested for competency. Only those who pass the exam are eligible to be issued a license to sell the insurance. Each state is responsible for the licensing process that the federal government requires.

Regulation of this industry is important because the consumer will be protected from insurance agents that are 'out to make a buck' at the expense of the consumer. The federal government frowns on the aggressive agents who look for a profit at the expense of the buyer. Another reason for the benefit of the regulations is the customer can look at mortgage life insurance, weigh the cost and the benefit, and see which policy will meet the needs best.

A provider of mortgage life insurance who is operating within the regulatory requirements of the government will be compensated. The more that is sold, the more money they make. However the compensation received by the agent cannot exceed five percent of his salary or five percent of the salary recognized as industry standard.