Mortgage Life Insurance – Is It Necessary?
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Everyone that gets a new mortgage or refinance is always offered mortgage life insurance. Most people either sign-up for the insurance or pass it by not even understanding what they are doing. If you do sign up it’s not the end of the world and probably it will work out fine. The trouble is do they really know what the specifics of the policy are.
If the do take the policy, every month they see a line item on their mortgage payment statement indicating the insurance but do they really know what they are getting. It’s comforting to know that in case of the death of the mortgage holder, the mortgage will be paid off. The piece of mind this gives people is important because they know the home won’t be a burden to the surviving spouse because of any lack of funds to make the payments.
If you want mortgage life insurance it is sensible to make sure you understand just what your policy covers and what it doesn’t cover. With all the different policies available and all the many companies selling this product doesn’t it make sense to know the specifics and benefits of your policy.
To be sure you’re getting what you paid for from your mortgage insurance payment it’s best to get help from a trained licensed insurance expert. When you buy from your mortgage broker you are just getting sold a product. A licensed mortgage insurance expert will explain your policy and help you pick out the right one for your situation.
- There are several different coverage you can apply for including life (that typically pays off the balance of your mortgage if you pass away), disability (that can either pay the balance of your mortgage, or make mortgage payments for a pre-determined amount of time if you become disabled), or critical illness (that can either pay off your mortgage balance or make your payments for you, if you become critically ill).
- Any mortgage insurance that pays off the balance of your mortgage only pays that, the balance of your mortgage. So the coverage that you’re provided with is a declining balance (as you pay your mortgage down over time). There is no remainder amount paid directly to you typically.
- Any benefits paid, are paid directly to the lender
- There are several different types of coverage (as with any insurance), that can include lender policies, brokerage policies, private policies. Any coverage has its benefits and drawbacks, so it’s important to be informed on what you’re signing up for.
- Mortgage insurance is different from term insurance, as it covers your mortgage balance only, compared with term insurance that provides you with a set amount of coverage for a specific term, and never goes down.
It’s important to pick the right mortgage insurance policy because it’s possible to pay too much and also choose the wrong kind of insurance. Finding a trained insurance expert to help, will allow you to pick the right policy and save money.
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