My son died leaving a mortgage. Does the mortgage insurance that the mortgage company makes you have pay for the house and then the house reverts to his son or does the company take the house?

If you are referring to PMI insurance... no it won't pay off the mortgage leaving the house free and clear for his heirs...

That would require a different type of insurance he would pay for... specifically for that situation. PMI insurance only beifits the lenders... it provides the homeowners (or Mortgage holder) no benefit.

If he had no supplimental insurance... and owed on the house, and it wasn't paid for... they can and will take the house back.

Smoothy is correct - PMI protects the lender in case of default by the home owner on his mortgage, and covers whatever loss they may suffer from that default.

If the house is going to pass to his son per the terms of your son's will, then he (your grandson) will need to finance the outstanding debt with his own mortgage. If your son had life insurance with your grandson named as beneficiary perhaps the proceeds can be used to pay the mortgage off. Alternatively the executor of the estate may decide to pay off the mortgage debt using other assets in the estate. But if that's not possible, then typically the executor will have to arrange for the sale of the house to cover the estate's debts (including the mortgage).

By the way - all this assumes that your son was the sole owner of the property (no joint tenant with rights of survivorship, such as a spouse), and that he named his son as the heir in his will. If he died without a will it will get complicated...