What type of life policy is typically used for mortgage protection?

The type of life policy that is typically used for mortgage protection is a decreasing term policy. This type of insurance is designed to provide coverage that diminishes over time in line with the balance of a mortgage. As the borrower makes payments on the mortgage, the outstanding loan amount decreases, and so does the coverage amount of the policy. This ensures that in the event of the policyholder's death, the payout is sufficient to cover the remaining mortgage balance, protecting their dependents from having to bear the financial burden of the mortgage.

In contrast, whole life and universal life policies offer level premiums and a cash value component, which may not align with the specific need for declining coverage associated with a mortgage. Term life policies provide coverage for a specified period, but unless it's specifically a decreasing term policy, they do not decrease in value over time. Therefore, the structure of a decreasing term policy makes it the most suitable choice for mortgage protection.