Mortgage life insurance is also known as mortgage protection insurance. Essentially, If you can’t pay off mortgage payments this life insurance type helps to protect your home. However, this insurance policy doesn’t have the same features of regular term life insurance. It doesn’t take the place of regular term life insurance.
Buying a home is one of the biggest investments you will make throughout your life. For this reason, it is very important that every family should purchase mortgage life insurance to guarantee their home. If one of the family members who earn money dies, this insurance policy helps the rest of the family to cover mortgage payments. Besides, creditors can’t take back your home.
How Mortgage Life Insurance Works
Generally, mortgage lenders and banks provide mortgage life insurance. If you die, the policy assists to pay off the balance of your mortgage.
This life insurance policy makes payments directly to banks or mortgage lenders. Family members cannot receive payments. Mortgage life insurance payout hasn’t a fixed amount. It has a payout amount enough to cover your mortgage balance.
Advantages Of Mortgage Life Insurance
It is very easy to purchase a mortgage life insurance policy. Unlike other life insurance types, the medical examination is not a requirement to buy it.
In addition, if your medical examination results are an obstacle to buying a whole life insurance or term life insurance policy, you can consider mortgage life insurance as a different alternative. In this way, you can protect your home financially.
Besides, this insurance product reduces your financial burden arising from mortgage payments. In this way, you can take maximum advantage of the financial benefits provided by the individual life insurance policy. So your term or whole life insurance policy may pay bills and other expenses.
Disadvantages Of Mortgage Life Insurance
This insurance type has a few serious disadvantages.
Although you pay the same amount of premium during your insurance period, insurance payouts continue to decrease as you pay your mortgage off. In other words, the payouts you will receive from insurer decrease as your mortgage debt decreases. It doesn’t stay constant.
Also, mortgage life insurance premiums are often more expensive than term life insurance premiums.
This insurance doesn’t help other expenses such as bills, college tuition. Because, if the insured die, banks or lenders get their money. However, the insurance company won’t make payment anything to your family members. Some people argue that mortgage life insurance helps the lender more than your family.
If you purchased regular life insurance policy before you die, other family members can use the insurance company payouts for the most pressing bills such as other loans, mortgage payments, or anything else.
Term life insurance may provide much more guarantee for your mortgage payments. A term life policy assists you to choose a length and policy amount that matches the duration of the debts you want to pay, such as 10, 20, or 30 years. For this reason, we recommend that you perform a detailed review and calculation before deciding which insurance product to purchase for your mortgage payments.