Private mortgage insurance covers the lender in case of a borrower's default on a loan, and does not pay out upon the death of a spouse. Mortgage protection insurance may cover a spouse's death if the policy is a joint one.
"Mortgage insurance" is a term often used for private mortgage insurance. Private mortgage insurance is paid by the borrower as a premium which covers the lender if the borrower defaults on his or her loan. The death of a spouse is not the same as a loan default, and therefore is not covered by private mortgage insurance.
Mortgage protection insurance, or mortgage life insurance, pays the lender of a mortgage in case a covered person on the policy dies. The beneficiary of the insurance is still the lender, as the insurance pays off the remaining mortgage balance. The family's survivors do not receive cash from the insurance, but they are no longer responsible for the mortgage. A mortgage protection insurance policy may or may not pay out upon the death of a spouse. Some policies apply only to individuals, whereas others are joint policies that pay the lender upon the death of either spouse. The fine print in a mortgage protection insurance contract states which individuals are covered.