If it has ever crossed your mind to get life insurance coverage, you may also want to include mortgage life insurance in your policy.
Obviously, this becomes relevant only if you pay a mortgage for the home you live with your family. But be sure you shopped around for quotes from different companies. It will help you to see different policy plans and coverage packages.
This coverage makes life easier for your survivor(s), just so that they won’t be dealing with a whole lot at the same time.
What is Mortgage Life Insurance?
Mortgage life insurance is a type of life insurance specifically targeted toward the mortgage holder. This type of policy pays out only if the insured passes on, the policyholder remains the owner of the property and the mortgage plan still exists after they pass on.
Furthermore, this plan is also known as mortgage protection insurance. It is less expensive than other types of life insurance and an inexpensive way to protect your mortgage.
This insurance is designed to help pay off the remainder of your mortgage loan amount, plus related interest.
Take, for example, when a person passes, his or her estate is the responsibility of his or her survivors. The heir may have to deal with lengthy probate proceedings, medical costs, tax bills, and other costs. That’s why it is important to buy a life and mortgage insurance policy for the life of a person.
Life insurance, Mortgage Insurance, and Mortgage Life insurance
Most times, life insurance, mortgage insurance, and mortgage life insurance can be confusing to many people. Though they are linked and intertwined somehow, still, they have differences in some ways. We will explain each here so that you will have knowledge or two about each of them and who needs which.
Life insurance
Life insurance is a policy offered by insurance companies. The policy makes a pay-out of benefit to the policyholder’s spouse or heirs specifically selected by the policyholder upon the passing of the policyholder.
Here, the policyholder pays the premiums while they were still alive. However, the premiums may be paid monthly, quarterly, semi-annually, or annually, depending on the policy.
So, the beneficiary is the person who receives the insurance money in the case of the passing of the insured. At this point, the beneficiary can use the pay-out according to desire.
Additionally, term life considers a person’s age, health, and general life expectancy. And can even be converted to whole life insurance policy.
Mortgage insurance
Now, mortgage insurance is a type of insurance that protects the lender against a borrower’s default on a mortgage.
It means that the insurance protects the lender if the borrower defaults on the mortgage. More so, this insurance is usually paid as a lump sum premium by the borrower, at the time of closing, to the mortgage insurer.
In essence, lenders use this insurance to reduce the risk of lending money. For example, if a borrower defaults on their loan, the lender would get back less than the amount that they gave to the borrower. So, the lender needs insurance to help cover that loss.
Mortgage life insurance
Finally, mortgage life insurance is a form of life insurance. It helps to protect an individual’s mortgage or loan in the event of the policyholder’s passing. Mortgage life insurance is usually offered by the lender, and it’s usually less expensive than term life insurance.
However, since the loan is paid off in the event of an individual’s death, it ceases to exist. So, it’s technically not “life insurance” in the first place.
What mortgage life insurance covers
Firstly, if you decide to change houses or move, you might lose your mortgage insurance. So, be sure of your plans and the clauses on the policy plan.
More so, it covers your family from financial hardship and losing their home in case of your passing. The plan begins as soon as you get a mortgage.
On a deeper level, the plan covers the interest and principal amount on a home loan, repayment of any outstanding mortgage balance, and remaining mortgage balances.
But before you finally go for this plan, check out the company’s stipulated life span of the policy and the affordability of the premium.
Types of mortgage life insurance
There are two types of mortgage life insurance.
Level Term
An insurance company guarantees a level amount of coverage for a loan that does not exceed 20 years. So, the amount of premium paid remains constant without increasing or decreasing.
Decreasing Term insurance
Here, the size of your mortgage keeps decreasing with the outstanding balance, until they both go to zero.
At what age can you buy coverage?
Many companies have set limits on the age of purchasers. Also, the state you reside in matters too. However, at 20 years, you can purchase coverage that can last for another 30 years. But the downside is that most companies have set an age limit on who can buy this coverage.
Benefits
In continuation, this coverage offers you some benefits that will always be worth your stress. This includes
Protection for your family after you pass.
It is true that your family does not get this in cash, but it is still a comfort to know that they will not go homeless in the event of your passing. This coverage will make sure they keep the house, so far they did not decide to change houses.
Affordability
Depending on your plan, you can get some low policy for your coverage if you look around well.
Flexibility
Also, you can be lucky enough to get a plan that pays if you ever become bedridden or disabled that you can not work again. That means that they will not wait until your passing before your mortgage is cleared.
Top mortgage life insurance companies
- AIG
- State Farm
- Nationwide
- New York Life
- USAA
- Liberty Mutual
- Mutual of Omaha
- Northwestern Mutual
