Why is mortgage life insurance so important for homeowners?
Lets face it, mention things mortgage life insurance in fact anything personal finance related – and we all know that it is as dull as dishwater. However, without things like mortgage life coverage – life could be a lot harder financially.
So, what is mortgage life insurance and why is it so important?
In a nutshell, in the event of you or your partner dying, mortgage life insurance can mean that the difference between keeping a roof over your head or ending up having your home repossessed a frightening thought.
And while many of us find organizing something like life insurance, a sombre business as it makes us face our mortality, it is the fair and right thing to do for your partner and any next of kin to make sure that your finances are in order in the event of your death.
So why do you need mortgage life insurance coverage? A mortgage life insurance policy runs for a fixed policy term most people take it put to run concurrent with their mortgage. Should you die before the end of the term period, the policy can help pay off outstanding balance of the mortgage on your home. This will be in the form of a cash sum.
This means that your dependants will not have the financial worry of trying to find the mortgage repayments in the event of your death. Neither will they have to worry about selling up and maybe downsizing in order to keep a roof over their heads the last things that you would want to put them through.
The good thing about mortgage life insurance is that you only pay for the coverage that you need so as the amount outstanding on your mortgage decreases, you are only paying out for the level of coverage you require.
Mortgage life policies are available on a single or joint life basis. If you have a joint life policy, the amount is paid out on the first claim only. You can decide how long you want the policy to run for and as we mentioned before, most people have it to run concurrent with their mortgage and in most cases you can have additional benefits such as critical illness coverage for an additional premium.
With critical Illness benefit the policy pays out either on death or on the diagnosis of a specified critical illness (such as certain cancers, triple artery bypass) – whichever occurs first. Check with your chosen insurance provider as to what illnesses are covered, as they can vary from insurer to insurer.
If the policy is paid out before the end of the policy term, it ceases. And if the policy is in force at the end of the term, it will have no cash in value.
If you are looking for mortgage life insurance, then do shop around and do not automatically accept the first quotation you get. Premiums as well as terms of the policy and other benefits can vary wildly from provider to provider and you could be surprised just how cheap mortgage life insurance can be, without any compromise on coverage.
Which is Better for Me, Life Insurance Or Mortgage Life Insurance?
Buying your house is a huge investment, and purchasers are finding that life insurance is a more flexible and less pricey alternative to the mortgage life insurance they buy from a bank. This makes life insurance another brick in the foundation of a good financial plan.
What’s Wrong With Mortgage Life Insurance ?
When people are in discussions with banks to finance their home they are asked if they want to have their home paid off if they die? Well who would say no to that? Unfortunately, people don’t look at other options that are open to them or shop around for different rates.
When mortgage life insurance is purchased through a bank, the coverage decreases as the mortgage is reduced; however the premiums stay the same. What this means is the cost of the coverage goes up as you are paying down your mortgage. Additionally, while mortgage life insurance pays off the loan’s outstanding balance, only the bank gets paid. You get the house, but no cash.
Life Insurance To The Rescue !
Life insurance can help relieve that debt while also adding cash value to your estate for your beneficiaries. Owning your own life insurance gives you these options:
Life insurance is portable, meaning you don’t have to re qualify for coverage during the term if you buy a new home or switch mortgage providers.
Renewable and convertible. A renewable and convertible life insurance policy can be converted to a permanent product at any time without a medical exam. In contrast, if your mortgage life insurance contract runs out at a bank, you will be older and potentially facing higher term life insurance rates.
Life Insurance Decisions
When you are comparing group mortgage life insurance from a bank and life insurance that’s personally owned, you’ll see that it is cheaper to have your own life insurance.