Mortgage life insurance
Mortgage life insurance is sometimes unavoidable, but it's not always the best choice. So what is mortgage life insurance? Here's what you need to know.Compare quotes today
What is Mortgage Life Insurance?Mortgage life insurance pays off or reduces the outstanding principal owed on your mortgage. Your financial institution may offer you the option to purchase mortgage life insurance when you buy a house. Depending on the institution, as many people as are on the mortgage can be covered by the mortgage life insurance—up to eight in some cases. The insurance is provided to you by a large insurer and not your financial institution. Generally, mortgage life insurance will cover all or a set percentage of your outstanding mortgage balance. Financial institutions each have their own maximum insurable limit and you cannot be covered for more than that. If your mortgage were very large, this limit may not cover 100%. Options also exist to put in place mortgage insurance that provides coverage if you lose your job and/or become disabled or very ill. This may also be sold separately as mortgage critical illness insurance or mortgage disability insurance.
- It’s convenient because your insurance premiums are included with your regular mortgage payments.
- It can be cancelled at any time. If you cancel your coverage within the first 30 days, many financial institutions will refund any premiums you paid.
- If you re-finance your existing mortgage with your existing financial institution, you’re able to keep your coverage even if your health worsens.
- If you have a problem getting individual life insurance because you have a certain condition or illness, mortgage life insurance might be a good alternative.
- Your premiums will stay the same but your coverage will decrease because you’re paying down your mortgage. If you have a $200,000 mortgage and after five years you’ve paid off $34,000 in principal, then your coverage will fall to $166,000. With regular life insurance, your coverage stays the same.
- If you decide to change your mortgage provider, you’ll lose your coverage. Your insurance isn’t portable and you’ll need to sign up for it again, possibly at a higher rate.
- Your mortgage life insurance is set against your mortgage. If you need more coverage for other things in your life, you cannot get more coverage than your mortgage. With individual life insurance, you have more flexibility to determine how much coverage you purchase and your beneficiaries can use it for any expenses, not just the mortgage.
- The mortgage insurance benefit is paid to the financial institution to pay off the outstanding principal on the mortgage. There is no benefit paid to your beneficiaries.
- In the short term, mortgage life insurance may be less expensive than other types of insurance, but over time it becomes more expensive for the coverage in place. Comparison shop the different types of life insurance to be sure you are getting the coverage you need for the best premium.
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Whether you opt for mortgage insurance or not, you should be covered for all of your outstanding debts one way or another. Get a quote today to find the best coverage for you.