If you’re a mortgage borrower, there’s one life insurance product specifically designed for you—and that’s mortgage life insurance. It’s a policy that can pay off the outstanding balance of your mortgage should you pass away.
Other insurers also either cover or lessen mortgage payments for a limited time if you suffer a severe disability and cannot work or lose your job, which may prevent you from earning an income.
In essence, life insurance, also called mortgage protection or life insurance, is a form of life or disability insurance. If you want to know more about it, listed here are the other key advantages of mortgage life insurance that are helpful for you and your family.
If you have underlying health conditions or are employed at a high-risk job, mortgage life insurance can offer you a guaranteed acceptance. It generally doesn’t require medical exams and other factors that most traditional insurance companies must consider in the underwriting process. Hence, it may be easier to qualify for coverage, giving your immediate family peace of mind.
On the contrary, most insurance companies require in-person medical tests because health is a crucial deciding factor in pricing. As a result, they tend to either disqualify people with pre-existing conditions and dangerous occupations or raise the cost of coverage to an unaffordable rate.
That being said, one concern about mortgage life insurance is that passing up the underwriting process could result in higher insurance premiums. However, if the applicant’s poor health condition or hazardous work environment would push the premiums of a standard life insurance policy even higher, mortgage life insurance is much more worthwhile.
Mortgage life insurance is considered group insurance. In other words, the mortgage payments can be spread over a large group of people like your family members, resulting in lower premiums.
Nonetheless, a lot of people perceive this benefit as disadvantageous, thinking it’s like locking your loved ones into paying off the mortgage. This perspective may only be true if the people involved are unaware of it. If they fully understand it, it’s considered a shared investment and risk management, which has never been wrong in managing finances.
The insurance money payable under mortgage life insurance coverage will always line up exactly with your mortgage balance. Consequently, it ensures that your family will have a roof over their head and can keep your hard-earned property to themselves, even if the main income used to make the mortgage payments is no longer there.
Another advantage of mortgage life insurance as one of the parts of your overall financial plan is that it can free up the benefits from other insurance policies. Since mortgage life insurance will shoulder all remaining mortgage debt, your family could leverage all the benefits from your other policies and use them for expenses other than the mortgage, such as living costs and children’s education.
If you think mortgage life insurance suits your situation, comparing prices from multiple providers is advisable to get the best deal. Additionally, before agreeing to a policy, be sure you completely understand what it covers and doesn’t.
You can purchase mortgage life insurance mainly in three ways, through your mortgage lender, an insurance company, and a life insurance provider. First, you can conveniently purchase it at the bank after or while you’re arranging your mortgage, usually within 24 months of closing a loan.
Other insurance agencies affiliated with mortgage lenders or independent insurance companies that acquire information from public records can also sell mortgage life insurance to you. This explains why the majority of homeowners tend to receive several offers after buying a property.
Moreover, most mortgage life insurance providers offer policies that usually last for the same period as the mortgage’s term. In contrast, most term life insurance has a limited coverage length that lasts only five to 35 years.
In addition, other life insurance providers offer a 30-day “free look” period, allowing you to get a refund of all the premiums you paid if you cancel your coverage. If you’re worried about your finances, their advisors will also help you to determine the ideal coverage that’s best suited for your financial situation.
Depending on your situation, getting mortgage life insurance will either make sense or waste your money. Most of the time, it benefits those who got rejected from purchasing whole or term life insurance for medical reasons. That’s why it’s a great alternative if you have pre-existing medical conditions that prevent you from getting traditional insurance policies.
Even so, it’s deemed necessary to take precautions for unprecedented situations in the future, especially if you’re your family’s breadwinner and a mortgage borrower. Always seek professional advice to help you make the right decision.