Mortgage life insurance protection is motivated by the need for better future guarantees. It is human nature to avoid thinking of unpleasant possibilities, such as passing away prematurely and leaving your family with either a large mortgage to pay or having to sell the home and move into something they can afford without your income.
Unfortunately, unplanned things happen all the time in life and it is better to be prepared for them than being blindsided and not knowing what to do. Some things for you to consider are whether your current life insurance policy is sufficient for your family or if you should look into buying mortgage life insurance protection on top of it.
What is Mortgage Life Insurance Protection?
Mortgage life insurance protection is a policy offered by your mortgage holder or a company they are affiliated with and will pay your mortgage in full in the event of your death or permanent disability. It will be offered to you when you sign closing papers on your house, but you always have the option to decline it. Should you choose to decline the coverage, you will be asked to sign a waiver stating they offered it to you, but you do not wish to purchase it at this time.
Pros and Cons of Mortgage Life Insurance Protection
Unlike typical life insurance policies that require a physical exam, a mortgage life insurance policy is much easier to get. Very few instances arise in which a homeowner could not elect the coverage. The main advantage of mortgage life insurance protection is that it provides homeowners and their families the peace of mind in knowing that the mortgage would be paid, so survivors would not have to move if the breadwinner passed away unexpectedly.
When deciding if mortgage life insurance protection is right for you, there are several factors to keep in mind. First, it is a decreasing benefit, meaning that the value of the payout goes down the closer you get toward paying off your mortgage. This may end up being a drawback because while your premiums remain the same, the amount of coverage your family would receive in the event of your death or disability does not.
How to Choose the Proper Life Insurance
If you are on a budget, how do you choose whether to buy standard term life insurance or mortgage life insurance protection? It usually comes down to the matter of looking at the state of your present health. If you are someone who has no long-term illnesses or lifelong conditions such as diabetes, you will probably be able to qualify for term life insurance quite easily.
Since term life insurance makes payments on more than just your mortgage, this is probably a better bet for healthy individuals. However, if you are unable to pass a life insurance exam due to poor health, mortgage life insurance protection may be right for you since there is no qualifying health exam involved.