Posts Tagged ‘critical illness cover’

Does Mortgage Life Insurance make Sense?

October 9th, 2012 No comments

Mortgage Life Insurance is vital for all owners of homes, condominiums, and townhouses. This is a specialized version of term life insurance and designed to ensure that the mortgage is paid in case you die. This avoids the prospect of foreclosure, which is what your family may have to face with the loss of a breadwinner.

Mortgage life insurance guarantees that your family can hold onto your home, which you may have by now invested a huge amount on.

How Mortgage Life Insurance Works

Mortgage life insurance protectionMortgage life insurance is a little different than traditional life insurance for the only reason that in the event of your death, your family would not be paid any money directly. Instead, if you were to pass away, the mortgage life insurance company would send a direct payment to your bank that satisfies any extra money owed on our property. This leads to a number of questions that must be answered before understanding the policy completely.

Mortgage life insurance is an elective insurance you can get. You as the mortgagee will be covered and in the event that you expire, the insurance will offer your beneficiaries with a tax-free lump-sum that will be employed to pay off the mortgage.

Mortgage life insurance is offered in different types of life insurance plans. Among the more common policies are:

  • Mortgage protection insurance,
  • Decreasing term life insurance, and
  • Level term life insurance

It may be a better idea to evaluate prices, coverage, and plans when deciding which plan may give all the benefits you want for your family.

  1. Mortgage protection insurance can guard you of your lose your job. It also protects you if you have an accident or become ill that keeps you from working. Your mortgage protection insurance makes sure that payments of your mortgage will still be met. This means that you can concentrate on getting well or getting a new job rather than upsetting about how your mortgage is going to be paid. Even better, this type of insurance is simple and fairly reasonably priced to set up.
  2. With decreasing term mortgage life insurance, the coverage is planned to decrease in the same way that the mortgage amount decreases. As you pay off the mortgage, the sum you owe also decreases and this kind of insurance will cover your debt. This makes the coverage more affordable and it is best as you plan on paying off the mortgage.
  3. Meanwhile, a level term mortgage insurance policy maintains the level of insurance for the entire life of the policy. This is best for interest for interest-only mortgages, where you only pay for the interest all through the mortgage and pay the whole loan at the end of the mortgage period.

Mortgage life insurance is generally in the form of decreasing term insurance, with the amount of life insurance lessening as the outstanding mortgage loan decreases over the years.

Benefits of Mortgage Life Insurance

Advantages of Mortgage Life InsuranceIf you are shopping for a new home, or already possess a home, mortgage life insurance can give you and your family the protection they need to maintain their home, in the event you pass away.

Mortgage protection insurance is not Private mortgage insurance, or PMI. Mortgage protection insurance is used to protect your family and your home. Private mortgage insurance is bought to protect your lender.

With a mortgage life insurance policy, the demise benefit proceeds are used to pay off the remaining balance of your mortgage. In case your mortgage is for 30 years, then a 30 year term life insurance policy may be procured to guard your mortgage.

Even though mortgage protection insurance can be purchased with the idea of paying off your mortgage, many financial advisors may recommend that you think about your entire financial situation, and buy a life insurance policy that takes into account all of your monetary needs for your family.

Additional Benefits

You can also glance into adding more levels of protection for your mortgage life insurance. You can consider:

Permanent DisabilityPermanent Disability:

Pays for the monthly approval for a number of months in the event that you get disabled. The payment is restricted to the maximum number of months or if you pick up from the disability. To know more about disability check out our Mortgage Disability Insurance.

Critical Illness Cover:

Pays a lump sum in the event that you are seriously ill. This cover generally has a list of critical illness and the payment will be upon analysis of an illness that is in the list.

Joint or Single Life Policy:

You have the choice of either offering cover for yourself alone or including your other half in the cover. The policy will disburse if either you or your spouse passes away and then the policy will be ended. In short, the policy only pays one time.

The Best Mortgage Life Insurance Policy

Mortgage Life InsuranceThe best policy of this type is one that comes from a legal company and can be found by browsing through your favorite search engine. Usually you are eligible to apply for this policy at any time but it may be offered to you in some way or form at your closing.

One of the most useful tips to remember is that if at any point you refinance, take another mortgage out or switch your mortgage to another lender. You must reapply for an entirely new mortgage insurance policy as they are only able to insure existing mortgage policies. This type of mortgage insurance applies only to individual mortgages and must be reapplied if you change your mortgage at any given time.

Obtaining mortgage life insurance quotes is the entry for getting started on this coverage and is quite an easy process.

Remember, if you were no longer there to provide for your family, they would not only need funds to pay for the mortgage, but also for other living expenses such as clothing, education, and all of the other items currently accounted in your family budget.

The bottom line is mortgage life insurance not only gives protection for your family, but it also assists them to continue their existing lifestyle in the home they share with you.