What is Mortgage Life Insurance?
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| Mortgage protection insurance or mortgage life insurance |
Mortgage life insurance is a type of insurance that acts as mortgage protection. It typically pays out a lump sum that can be used to help your dependents clear your mortgage if you die. This type of life insurance is often sold as a decreasing term ‘policy, which means that as you gradually pay off your mortgage, your pay out also reduces over time.
Your loved ones will have one less financial burden at an already difficult time, by providing lump sum to pay off mortgage debt.
How Does Mortgage Life Insurance Work?
If you have a repayment mortgage, part of your payment each month is used to chip away at the amount borrowed and part is used to clear any interest owing. The outstanding balance on your mortgage therefore goes down over the years .
Mortgage life insurance is usually designed so that the amount of cover you’d get decreases over the policy term, in line with your outstanding mortgage balance.
Do You Need Life Insurance For A Mortgage?
You don’t have to take out life insurance for a mortgage; it’s not a legal requirement. But some providers might want you to have a policy in place as a condition of their mortgage offer.
Many people take out insurance at the same time as getting a mortgage, seeing the expense as a small addition to their monthly mortgage payments.
A mortgage life insurance policy is designed to provide peace of mind so that if the worst happens, your family won’t struggle to meet the mortgage bills and will still have a roof over their heads. If you don’t have dependants, you may decide it’s not necessary.
Do I Need Life Insurance Once The Mortgage Is Paid Off?
If you’ve cleared the mortgage, but still want to leave your loved ones something, you might want to consider a new life insurance policy. If you’re mortgage free and approaching your retirement years, it might be worth looking at over 50s cover. This type of cover offers a guaranteed payout, no matter when you die.
What’s The Best Mortgage Life Insurance Cover?
The best mortgage life insurance cover will depend on you and your circumstances. For example, if you’re slightly older or have a pre existing medical condition, you might have to pay more for your policy. If you’re younger with no medical problems, you could get the same cover at a cheaper price.
Mortgage Protection Insurance
Purchase a term life insurance policy for at least the amount of your mortgage. Then, if you pass away during the “term” when the policy’s in force, your loved ones receive the face value of the policy. They can use the proceeds to pay off the mortgage.
Proceeds that are often tax free.
Actually, the proceeds from your policy can be used for any purpose your beneficiaries choose. If your mortgage has a low interest rate, they may want to pay off high interest credit card debt and keep the lower interest mortgage.
Mortgage protection insurance may want to pay for home maintenance and upkeep. Whenever they decide to do, that money will come in handy.
Use our life insurance tool to help you get an estimate of the amount of coverage you may need, and how much a mortgage life insurance quote could cost.
Mortgage Protection Insurance Cost
How much a mortgage protection insurance policy may cost you depends on a few different factors. Insurance companies will examine the remaining balance screenshots f your mortgage loan term. As with a traditional life insurance policy, they’ll also take your age, job and overall risk level into consideration. In general, though, you can expect to pay at least $50, a month for a bare minimum mortgage protection insurance policy.
How Long Do You Have To Have Mortgage Protection Insurance?
You will continue to make monthly premium payments for the duration of the policy term, if you buy mortgage protection insurance policy. Your insurance company can cancel your benefits if you stop making your premium payments. Like most other types of insurance, you’re free to cancel at any time. However, keep in mind that you won’t get any of the money back that you paid to your insurance provider when you cancel.
Where To Buy Mortgage Protection Insurance
There are different ways you can buy a policy, Do you think that mortgage protection insurance might be right for you?, including:
- Through a private insurance company: there are several private insurance companies that specialize in mortgage protection insurance policies. The specific companies you’ll hav e access to can vary depending on your state.
- Through you mortgage lender: when you close on your loan, your mortgage lender might offer you an mortgage protection insurance policy. You might be able to ask a representative or your real estate agent for a referral to a company that offers an mortgage protection insurance policies.
- Through a life insurance provider: if you have another type of insurance provider, you might also be able to save by building insurance coverage together.
No matter where you decide to buy mortgage protection insurance, you should make finding a policy your first priority after you close on your loan . Most insurance providers have a limited window in which you can buy a policy. If you miss your window, you might not be able to find an mortgage protection insurance policy. If you’ve already closed on your loan and no longer qualify for mortgage protection insurance, consider shopping for a term life insurance policy instead.
What Mortgage Life Insurance Protection Do I Need?
There are three types of insurance you should consider when taking out a mortgage.
- Life insurance: this will protect your loved ones if you die during the mortgage term, helping to payoff the outstanding mortgage balance. This is particularly important if you have a joint mortgage with a partner or spouse who will be left with the extra cost when you’re gone.
- Buildings insurance: mortgage providers will usually insist that you take out building insurance, as part of their mortgage offer. This is to protect their investment, but it also protects you, if your home is damaged or destroyed.
- Critical Illness insurance: this provides a lump sum that can be used to pay off your outstanding mortgage balance, if you’re diagnosed with a specific ‘critical’ illness.