What happens with the mortgage insurance when a person dies?

Assuming that the mortgage insurance policy was in force at the time of death, and all other conditions of coverage have been met, the insurer should pay off the balance of the mortgage; that is the purpose of insurance of that type.

Thereafter, the property will pass, free of the encumbrance, to that person who may have been named as a co-owner of the property. If the decedent is shown to have been the sole owner of the property as of the time of death, it will pass according to terms of his/her Will; if there was no Will, it will normally pass according to the laws of descent and distribution of the locality in which the decedent lived at the time of his/her death, or where the property is located.