What to Know About Mortgage Life Insurance

Mortgage life insurance is a product that you can purchase in order to protect your family from having to pay the mortgage when you pass away. Here are the basics of mortgage life insurance and how it works.

Mortgage Life Insurance

When an individual purchases mortgage life insurance, it is so that they will be able to have their mortgage paid off in the event of their death. Mortgage life insurance companies will pay a mortgage lender directly when the insured passes away. This type of coverage is designed to decrease as time passes. Mortgage life insurance is only going to pay the amount that is still owed on a property. It does not actually pay an amount that is equal to the value of the property. Therefore, as you continue to pay down the balance of your mortgage, the mortgage life insurance also decreases to reflect this need. Your mortgage life insurance is scheduled so that it will conclude on the same day that you make your last payment on your house.

Terminal Illness

Typically, this type of insurance only pays when the insured dies. However, many policies are also going to pay if you are diagnosed with a terminal illness. If the doctor tells you that you are going to die within the next year, you can contact your mortgage life insurance company and they will pay off your mortgage for you. At that point, you will be able to live your remaining time without having to worry about making a mortgage payment.

Advantages

Getting mortgage life insurance can provide you with some advantages financially. Most people purchase a traditional life insurance policy as a way to protect their family financially when they die. However, if you die with only a traditional life insurance policy, money from that life insurance payout is going to have to go towards paying off your mortgage. In many cases, this is not going to leave your family with very much money to live on. They will be able to get rid of the mortgage balance, but they may not be able to live on the rest of the money very long. With mortgage life insurance, this is not going to be an issue for your family. You can provide a way to pay off the mortgage when you die and your family is going to be able to keep the entire life insurance payout to use as they wish. When you are trying to take care of your family, this type of policy can provide you with a lot of assurance.

Disadvantages

The biggest disadvantage of getting mortgage life insurance is that you are going to have to pay additional money for it. Most people do not have a lot of extra money lying around every month after they are already paying a life insurance premium. In order to get this type of coverage, you are going to have to purchase a separate policy and make life insurance premium payments.



Can I keep my mortgage life insurance policy if I pay off my mortgage early?



If you pay off your mortgage early, mortgage life insurance would no longer be necessary. With this type of policy, the insurance provider works directly with your mortgage lender to pay off the existing balance once you pass. Your family would not receive any benefit for this type of policy if you did not have a mortgage balance outstanding. Once the mortgage is paid off, you should contact your mortgage life insurance carrier and cancel the policy because it becomes an unnecessary expense.

blog comments powered by Disqus