What is mortgage life insurance? Well, if you were to pass away before you were able to pay off your home in full, mortgage life insurance (or mortgage protection insurance) would step in to settle the difference. In this way, your family wouldn’t need to stress about how to meet mortgage payment requirements without the income you once provided.
Depending on your situation, though, term life insurance could represent a more optimal strategy for you. In this case, the very first step is to educate yourself about how term life insurance actually works. More often than not, term life will be the more economical choice for safeguarding your mortgage. Let’s examine the primary advantages of term life insurance.
You can get more coverage for the same money with term life insurance. This is especially true if you have no major disqualifying health issues. With mortgage life insurance, you will not normally be required to complete a medical examination, but that is where the advantages end. Conversely, if you allow your insurance company to gain additional information about your health for term life insurance, they may be able to lower your rate.
You Get to Choose the Amount of Coverage You’d Like for Your Family
When you purchase a term life insurance policy, you can opt for sufficient coverage to provide in full for your family, beyond mortgage payments alone. You have the ability to pay college tuition for your children, help your loved once make up for your lost income, and/or cover end-of-life expenses after you pass away.
With mortgage life insurance, on the other hand, you can only fulfill payments on your home mortgage, and the payout to your family in the event of your passing could be reduced over time to reflect any remaining balance.
Give Your Family the Gift of Flexibility
Term life insurance pays a lump sum to the beneficiary of your choice. You have the freedom to name your husband, wife, or child to receive a payout in the event of your death, should that event occur during the predetermined term of your policy. Your chosen beneficiary can then use the funds in any way they choose, prioritizing their needs as they see fit.
If you choose a mortgage life insurance policy instead, please be aware of the difference: Your family could receive nothing, as your death benefit would normally be paid back to your lender, instead.
Extend the Original Term of Your Mortgage
The common duration of most term life insurance policies is five to thirty years. Did you know that you can select your preferred duration for your term life insurance in accordance with the unique timing of your future financial obligations? You don’t have to choose a certain duration or a set number of years just because everyone else does.
With a mortgage life policy, however, your freedoms dwindle, as repayment is normally concurrent with the duration of your home loan by itself. Should you decide to refinance, your mortgage life insurance policy could even be terminated.
Is Mortgage Protection Insurance Accessible if I Have a Preexisting Health Condition?
If you’ve been told you have a preexisting health condition, you may find your access to reasonably-priced life insurance to be severely curtailed. If you find yourself unable to qualify for the life insurance you want but still need to set up insurance to cover your mortgage at the minimum, it could be worth your time to look into a mortgage-based life insurance policy.
Investigate the following before committing to a mortgage life insurance policy:
Make sure any insurance product you are seriously considering will cover your family in the event of your passing. Some only cover accidents over the course of your life.
Simplified-issue term life can be a great solution if you are finding it difficult to qualify for term life insurance. Be sure to analyze rates for the most economical solution.
Check online reviews, read every line of policies that interest you, and investigate the financial strength rating of your chosen insurance company.
Alternative Insurance Options
The language used to describe insurance products can often seem vague to the untrained eye, so here are a few definitions to help you choose the best product for your family:
Consider disability insurance rather than mortgage disability insurance to cover your loved ones should you become unable to work. The advantage? Greater flexibility for your family if they need to receive a payout.
In the home-purchase process, you may need to acquire private mortgage insurance (PMI) if you are only able to make a down payment of less than 20 percent. In this case, your payment would be added to your monthly mortgage payment as a matter of routine. Please be aware that PMI will not pay you directly should you accidentally default. As in the case of mortgage life insurance (see above), the lender would be paid, instead.
If you are purchasing your first home, now is the best time to evaluate all of your life insurance options to find the best bundled deal for you. Questions? Eventefi can help!