Mortgage Protection Life Insurance: What Type is Needed? Who Needs It? Why is it Needed?

November 5th, 2019

Do you have a mortgage on your home and a family? Then, yes, you do need mortgage protection life insurance. What is mortgage protection life insurance? This is the insurance which will pay off the mortgage on your home in the event of your death. This insurance, however, will not usually pay for funeral expenses et cetera. It is strictly for the mortgage.

Who needs mortgage protection life insurance? Anyone who has a mortgage on their home and would have family left to carry on in if something happens to the mortgage holder. If both two people (both spouses) are listed on the mortgage contract then both of them need to carry this coverage.

Where can you get mortgage protection life insurance? Independent insurance agencies are the best. Your mortgage company will try to get you to take it out through them, but they will also be about one third to one half higher than most insurance companies. Simply get on the internet and do your homework. Or go around to your local insurance companies and check rates.

What should you be aware of when searching for mortgage protection life insurance? You must remember that this is a life insurance and there will be health questions and maybe even a physical. So if you are in poor health, you may be denied this coverage. However, ask your agent if there is any other type of coverage you could take out that could help pay off a mortgage if you pass away. Some companies carry guaranteed placement policies where there are no health questions or physical. Although most of them do not provide enough coverage to pay off an entire mortgage, they can still be a help with expenses.

What type of mortgage protection life insurance do you need? There are two basic types of mortgage protection life insurance. They are decreasing term insurance and level term insurance.

Decreasing term insurance is set up for people with a mortgage which has a balance that decreases over the mortgage term. With a decreasing insurance policy the amount of the coverage will decrease each time to match the amount of the remaining balance of the mortgage. In other words, the amount of the insurance policy will always match the amount of the mortgage.

Then there is the level term insurance. This is for persons who have a mortgage where the principal balance remains the same at all times and repayment goes only to the interest. Since the principal balance remains the same so does the coverage of the mortgage protection insurance.

There are also two types of coverage which can be added to policies to ensure more peace of mind.

One such coverage is terminal illness benefit. This coverage most of the time is provided in the mortgage protection life insurance and will give you a payout to pay off the mortgage in the event you are diagnosed with terminal illness. Once the payout is given, the policy will become null and void.

The other coverage is critical illness benefit. Although this is not usually standard on a policy, it can be added to it. This is if you have a critical illness you can receive a payout to pay off the mortgage. However when you if you recover from the illness, the policy is still null and void and will no longer be active. This type of coverage can actually be bought as a stand alone policy or added to the mortgage protection life insurance.

Therefore, if you are a homeowner with a mortgage and have a family you love, you will desire to carry mortgage protection life insurance. This way if something happens to you, your family will not be burdened with the financial worry of paying back a mortgage. This way life insurance with savings can be seen as an asset.