Mortgage Insurance and Death: What Happens Next?

Mortgage insurance death benefits are typically meant to pay off the lending institution that holds your mortgage in the event of a death, disability, or citically illness.  The insurance ensures that your family and dependents can hold on to the security of their home as they face a new adjustment period.  In order to ensure that your policy is current,and will pay out upon your death, there are a few simple things to consider:

Know Your Coverage

While typical mortgage insurance does not require any medical examinations, many policies may have exclusions for deaths related to pre-existing medical conditions. Make sure you are aware of all exclusions. 

Alert Your Family to Your Coverage

Make sure that your family and dependents are aware that you are covered for mortgage insurance death benefits.  Your family will typically inform the bank of your passing, and the insurance company will pay out the policy.   Be sure your family knows where the policy is located to avoid delays.  Leave instructions for your family in the case of your death because they may continue to pay the mortgage.

Collecting Paperwork Related to Death

It is imperative that all appropriate steps are taken to prepare the required documentation to confirm the death of a policy owner. Thd prepartion will include death certificates and cause of death statements.  If required, a post-mortem should be scheduled. The family doctor should be informed of the death to corroborate and file any medical history information that could be relevant to the incidents surrounding the death.

Underwriting & Payout of Mortgage Insurance Policies

The underwriting process is the process in which insurance companies check the background of the person to ensure that a person is eligible for coverage under the given policy. In most mortgage insurance policies, underwriting of the policy actually begins at the time of death of a policy owner. The insurance company will conduct a full check on your medical history and incidents that led to your death. If facts related to your health condition crop up at this time, there could be situations where claims are denied. In such cases, your family should be aware and should be able to pursue your case with the insurance company and involve your family doctor as required. In most cases, however, lender’s insurance will not require your family to get involved and the payout will be made directly to the lending party through the insurance company at time of death.

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