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Mortgage life insurance
The vast majority of people who purchase homes will obtain a mortgage from a lending company when making the purchase. When this happens, it is highly likely that you will be offered mortgage life insurance. Mortgage life insurance provides insurance coverage to help pay off the remainder of your mortgage in case you pass away. This can help keep your family in your home and make sure that they have the financial security so that they do not have to move. It is important to note that mortgage life insurance is not required, nor is any other type of life insurance required, in order to obtain a mortgage.
When considering purchasing mortgage life insurance, a number of variables come into play. In addition to your family's financial situation, choosing the right policy for you depends on your health. Younger homeowners may decide not to get this type of insurance if they have few medical issues and can get better rates on different types of insurance policies, such as term life insurance. For people that are older or have more significant amounts of health problems might consider mortgage life insurance because it can offer more considerable death benefits than some of the alternatives that they qualify for.
Mortgage life insurance, sometimes called mortgage protection insurance, is a term for life insurance products that help pay for the mortgage balance that you still owe if you pass away. Most often, this insurance is an offering from your bank or mortgage lender. It can also be purchased, however, through insurers that are unaffiliated with the mortgage itself. How these policies are structured, and the benefits they provide, can vary a lot. This is because a large number of companies offer insurance plans of this type. It also means that the rates for these policies can vary a lot. Shopping around for the policy that fits your needs at the best prices and highest quality is a good idea.
There are three types of mortgage life insurance policy structures.
A decreasing mortgage life insurance policy has a death benefit that stays fixed for the first years of coverage and then decreases over time after that. This is because people owe less on their mortgage as they pay it off.
A level mortgage life insurance policy has a payment that remains the same for the entire life of the plan. If you are on an interest-only mortgage, this may make more sense than the other plans.
Another option is the mortgage principal plan. In this type of policy, the death benefit is tied to the principal that is owed on the mortgage. Similar to a decreasing mortgage life insurance plan, the death benefit decreases over time. If you pay off your mortgage faster or slower than expected, however, this policy will reflect.
Restrictions Of Mortgage Life Insurance
Different than term life insurance, the death benefit for mortgage life insurance is generally paid to your mortgage lender and not your loves ones. If you have more coverage then you need, your family does not receive the excess payout.
Some mortgage protection plans only make a payout if you die from an accident, which is a similar to accidental death insurance. This means if you die from a heart attack, cancer, or other health related cause there may not be any payout. Research these types of restrictions before purchasing a mortgage life insurance policy.
Also, many mortgage life insurance policies are tied to a specific home or mortgage. This means that if you move, another plan would need to be purchased to replace the plan you already have. This can mean higher rates since insurance quotes go up as people get older.
Do the research for each policy that you consider, and look for the restrictions listed above. Also, you can ask your insurance agent at General Insurance for more detail.
Term Life Insurance Versus Mortgage Life Insurance: Which Is Best For You?
Term policies are generally considered to offer greater flexibility in their benefits; they also tend to be cheaper if you are a relatively healthy person and a non-smoker. Also, term life insurance makes a payout that is not based on your mortgage. This means that if you pay your mortgage off, the death benefit to your beneficiary can be used for other things.
Term life insurance makes a death benefit payout upon your death, so long as it happens within the term of your policy and payments are made on that policy. Mortgage life insurance tends only to pay a death benefit only if your death is accidental.
One of the benefits of a mortgage life insurance plan is that there is often no medical exam involved. You will have to answer health questions, but will not need to take an examination outside of that. Term life insurance plans most often require both health questions and a medical exam to be approved.
Other Mortgage-Related Insurance Policies
Other insurance policies are related to mortgages as well. Mortgage disability insurance, for example, covers your mortgage payments if you become disabled. Another insurance option is mortgage unemployment insurance. If you become unemployed for a period, a mortgage unemployment insurance plan will help you cover your mortgage payments while you are looking for new work.
Private mortgage insurance, or PMI, is also available. If the mortgage you are getting is over 80% of the value of your home, your mortgage company may require this type of insurance. This is because they may consider you to be high-risk. This type of insurance helps protect your lender if you do not make your payments.
There are many options for life insurance, and it is important to consider the pros and cons of each. General Insurance is happy to help guide you along the way.