A mortgage life insurance can help save your family from paying off your debt in case the unfortunate comes. To make the best decision for the future benefit of your family, you need to know what a mortgage life insurance is, its types, benefits, and its drawbacks.
You may have heard about mortgage life insurance but do not know whether you really need to get one or not. It is important that you know more about this type of insurance to help you make the best decision. Here are important things to know about mortgage life insurance:
Know what mortgage life insurance is
Mortgage life insurance is a type of life insurance policy that pays your mortgage balance in the event of your death or disability and you are not able to pay your mortgage anymore. Otherwise known as mortgage protection insurance, this plan helps protect the family you leave behind from your debt, which they may not be able to pay off in the future. This insurance is usually offered to you by some banks and credit institutions when filling out loan forms. Other agents may also contact you about it through Mortgage Life Insurance Leads.
Types of mortgage life insurance
Mortgage life insurance comes in two types, namely decreasing term life insurance and level term life insurance. With decreasing term life insurance, the benefit of the policy decreases together with the outstanding balance of the mortgage. While you are still living and your mortgage reaches zero, your mortgage life insurance also expires. On the other hand, with level term insurance, the benefit of the policy remains level throughout the term of the contract. This is commonly applied for interest-only mortgages.
Benefits of mortgage life insurance
The main benefit of having a mortgage life insurance is that your house will be fully paid for at the event of your passing. The family you leave behind would not have to worry about fulfilling the financial obligations for the house you are paying for. Furthermore, with mortgage life insurance, there is often no need for pre-medical examinations to qualify you for the insurance. It is therefore advantageous for individuals with existing medical conditions, who are often rejected or considered risky for other life insurance types, to take advantage of this insurance and help save the family from future burden.
Another great thing about mortgage life insurance is that most policies come with terminal illness benefit. This benefit covers repayment for the mortgage in the event you are diagnosed with terminal illness that hinders you to work and pay for your loan amortization. Instead of waiting for you to actually pass away, your house will be paid by your insurance upon official diagnosis of such fatal illness.
Mortgage life insurance drawbacks
Mortgage life insurance also has its drawbacks. First of all, this type of insurance has a very limited purpose because it only covers your mortgage when you pass away. The value for your money and the benefit your family gets in the end may not be better than other life insurance policies. With other life insurance policies, it is always possible that your family may get a sufficient amount that will pay off your mortgage, as well as some spare money for other financial needs. To help you out, it is always best to compare quotes of different insurance policies from different trusted companies.
Another drawback of mortgage life insurance is that you have no control over the insurance amount. With this type of insurance, the settlement directly goes to your creditor. It is not like other life insurances, in which your family has control over where the settlement will be better spent. A good example is when you have another debt with a higher interest that would be prioritized if the insurance settlement was given to your family. To conclude, the creditor is more benefited in this insurance type than your family.
When deciding to purchase a mortgage life insurance, you need to consider the type of mortgage loan you have, as well as your other financial issues and priorities. Make sure you consult a trusted insurance broker about which type of life insurance is best for your condition and your goals.