US taxation on mortgage insurance

I am a US/UK dual citizen living in the UK. I am married to a UK citizen.

We are buying a property and the mortgage lender has sold us "Mortgage Insurance", which pays out a lump sum in the event of one spouse's death, in the amount of the remaining unpaid mortgage.

The lump sum is paid out tax-free in the UK; the theory is that PAYE has been paid on the monthly premiums.

The agent has advised me to check whether this lump sum payment is subject to US tax.

In the worst case, when I die the money will be "income" for me and my probate will have to pay US tax on the lump sum as if it were an extremely high yearly income (10X what I earn yearly today); then what's left, is available to my wife to pay down the mortgage.

I would like to know how other UK borrowers subject to US tax have approached this problem.  Thanks.

How are you structuring the purchase? Are you using joint tenancy or tenants in common?

Generally in the U.S. The payout on a life insurance policy on the death of the insured is not taxable. I'll be interested in hearing the advice here as I am in a similar situation, with a life insurance on me as my wife will only get 50% survivor benefits on my pension. Will that be different if I die while we are living in the UK?