Affordable Life Insurance Protection for Your Family
Learn about Mortgage Death Insurance
If you are buying a home or own a home with a mortgage loan you may be concerned about how your family would pay off the home loan in case you were to pass away.
That’s where mortgage death protection insurance (also known as mortgage life insurance) can help to keep your loved ones in the home they share with you.
With a mortgage life insurance plan your spouse or any beneficiary you choose will have the money needed to pay off the outstanding mortgage on your house or condo.
That means you get peace of mind knowing they’ll be safe and secure with a place to live, and your loved ones will be able to remain in the home they shared so many memories with you.
How Does It Work?
Actually, it’s pretty straightforward – You take out life insurance on the main breadwinner of your family; however, you may want coverage on both you and your spouse.
It’s life insurance that pays the balance of a mortgage if the mortgagor (insured) dies.
Upon the insured’s death, the beneficiary receives the death benefit free from federal income taxes and can use the money to pay off the mortgage loan balance on your home.
How Much Insurance Do I Need?
You select an amount of life insurance equal to the outstanding balance owed on your home mortgage loan.
How Many Years Do I Need Insurance?
You select coverage to last for a duration equal to the duration of your mortgage loan, which may be 10, 15, 20 or 30 years.
Does the Amount of Insurance Protection Decrease Over Time?
There are a couple types of life insurance that can provide mortgage protection, including level term life insurance and decreasing term insurance.
Level Term: The most common type of life insurance used to protect the balance owed on your mortgage loan. You pay the same amount of premium each year (or monthly) and the amount of insurance coverage remains the same for the entire duration of your policy.
Decreasing Term: A type of life insurance where you pay the same amount of premium each year (or monthly) and the amount of insurance protection provided by the policy declines each year in-line with your decreasing balance on your home mortgage loan.
Level term insurance is more popular for mortgage payoff death insurance protection because it offers more affordable pricing and your coverage amount provided by the policy does not decrease over time.
Mortgage Protection Insurance vs Term Life Insurance
Mortgage protection insurance is a policy sold by your mortgage company or bank that pays off your outstanding loan upon your death. The beneficiary of this type of insurance policy is usually the mortgage company.
However, it may work out better for your spouse or a family member to receive the proceeds, which would give them the choice of paying off the mortgage in full, or continue making the monthly mortgage payment.
Why? Because, there may be more pressing financial needs than paying off the mortgage on your house.
What is an Option to Mortgage Protection Insurance?
Term life insurance is another option which offers more competitively priced plans and allows you to name your child or children as beneficiaries rather than the mortgage company.
In addition, mortgage insurance has other disadvantages.
The premium you pay is usually lumped into the home loan, which means you are paying finance charges on the premium.
A healthy non-smoker can usually beat the price of mortgage insurance by up to 50% by choosing term life insurance.
Another disadvantage is the insurance stays with the house. That means it’s not transferable to your next home; whereas, regular term insurance remains with you regardless of where you live.
Who Should Purchase Mortgage Insurance from the Mortgage Company?
There are some who may choose to get mortgage insurance instead of term life insurance, especially if you have health issues; such as, obesity, high blood pressure, smokers, diabetics, or have other health issues that keep you from getting preferred rates or in some cases keep you from getting approved for life insurance at all. Those people may be better suited for mortgage insurance, as it may be your only option depending on your health.
The reason you buy a life insurance policy is to reduce the overall financial impact of your death on your loved ones who depend on your income, including your spouse and children.
Top Pick – JRC Insurance Group
JRC Insurance Group helps you shop, compare and save on life insurance. Regardless of your age or health background, we'll shop our 40+ insurance companies and find you affordable life insurance you need to protect your family and fit your budget. Compare the best life insurance rates for savings up to 73%. Get Your FREE Quote
Highly Recommended – Haven Life Insurance Agency
Haven Life uses the information provided in your application to make an instant decision on your application. Healthy, qualified applicants (based on the information provided in your life insurance application) can be insured immediately with no medical exam while other applicants can receive immediate coverage pending a medical exam.
Applicants age 60-64 are eligible to apply for up to $1 million in coverage; subject to underwriting approval.
Some qualified applicants (U.S. citizens up to the age of 59) will be able to finalize coverage without the need for a medical exam. The majority of applicants are still required to take a medical exam.
Keep in mind: Issuance of the policy or payment of benefits may depend upon the answers given in the application and the truthfulness thereof.