About Mortgage Life Insurance?
There are some things in life that are worth protecting and a house is definitely one of those things.
A mortgage is the biggest loan most people will take out during their lifetime. But what happens to your house if you die before paying off the mortgage? What happens to your family who is still hoping to live in the house, but no longer has the main breadwinner to pay the mortgage payments?
In this article, we look at the reasons why you might want to consider protecting your mortgage with a specialised life insurance policy and answer some of the general questions we get asked regarding life insurance and mortgages.
Protect Your Mortgage Now
Do You Need Life Insurance For A Mortgage?
Mortgage Life Insurance is not mandatory. But you could be making a big
mistake without it.
It is not a legal requirement to have life insurance for a mortgage, but it is good advice for most people when taking out a mortgage. This is because if the borrower were to die during the mortgage term, the lender would still need to be paid back the outstanding amount of the loan. Life insurance is one way to ensure that this debt is paid off in the event of the borrower’s death, thus protecting the lender and the borrower’s family.
Therefore, if you are taking out a mortgage, it’s a good idea to consider taking out life insurance to cover the amount of the loan. This will give you peace of mind that your loved ones will be able to keep the property and not face the burden of the mortgage payments in the event of your death.
It’s a good idea to shop around for life insurance policies and compare quotes to find the best cover and price for your needs. Some lenders may offer their own life insurance policies, but it’s important to compare them with other options available in the market to make an informed decision.
It’s also worth noting that life insurance is not the only type of insurance that may be required for a mortgage. Home insurance is also typically required to protect the property against damage or loss.
Mortgage life insurance is designed to pay off the outstanding balance on a mortgage if the borrower dies during the mortgage term. The payout from the policy is typically made directly to the lender to ensure that the outstanding mortgage balance is cleared, allowing the borrower’s family to keep the property without having to worry about making mortgage payments.
The cover amount of mortgage life insurance is typically equal to the outstanding balance of the mortgage at the time of the borrower’s death.
Mortgage life insurance policies may also include additional features such as critical illness cover or disability cover. These features provide additional protection in case the borrower becomes critically ill or disabled during the mortgage term and is unable to work and make mortgage payments.
Decreasing Term For Mortgage Life Insurance
Decreasing term mortgage life insurance is a type of mortgage life insurance where the coverage amount decreases over time, in line with the decreasing balance on a repayment mortgage. This means that the payout from the policy will decrease as the outstanding balance on the mortgage decreases.
With decreasing term mortgage life insurance, the coverage amount is set to match the outstanding balance on the mortgage at the beginning of the policy term. As the mortgage is paid down over time, the coverage amount gradually decreases, so the policy becomes less expensive to maintain.
This type of policy is often used in conjunction with a repayment mortgage, where the borrower gradually pays off the mortgage balance over the term of the loan. By matching the coverage amount with the outstanding balance on the mortgage, decreasing term mortgage life insurance ensures that the borrower’s family will have enough coverage to pay off the outstanding mortgage balance in the event of the borrower’s death.
It’s worth noting that decreasing term mortgage life insurance only provides coverage for the outstanding mortgage balance, and not for any other debts or expenses. For this reason, it may be necessary to consider other types of life insurance coverage in addition to a decreasing term mortgage life insurance policy to ensure that your family is fully protected in the event of your death.
Level Term Life Insurance For A Mortgage
Level term life insurance is a type of life insurance policy where the coverage amount remains the same throughout the term of the policy. This means that the payout from the policy will remain constant, regardless of when the policyholder passes away during the term.
Using a level term life insurance policy for a mortgage means that the coverage amount can be set to match the outstanding balance on the mortgage. This ensures that the policy payout will be enough to pay off the entire mortgage balance if the policyholder were to die during the term of the policy.
Level term life insurance can be a good option for a mortgage because it provides flexibility and greater protection for the borrower’s family. Unlike decreasing term mortgage life insurance, which only covers the outstanding mortgage balance, a level term life insurance policy can provide coverage for other expenses or debts as well.
In addition, a level term life insurance policy can be used for other purposes beyond just paying off a mortgage, such as providing for the policyholder’s family in the event of their death or covering other outstanding debts or expenses.
It’s important to consider the specific needs and circumstances of your family when deciding on the type and amount of life insurance coverage to purchase. A financial advisor or insurance agent can help you determine the appropriate level of coverage for your situation.
Tips When Taking Out Mortgage Life Insurance?
There are plenty of options out there. But how do you know which policy is
best for you?
Remember, the goal of mortgage life insurance is to ensure that your loved ones are protected and able to keep the family home in the event of your death. Take the time to carefully consider your options and make an informed decision that provides the best protection for your family.
What is the difference between life insurance and mortgage life insurance?
Life insurance is a type of insurance policy that provides a lump sum payout to your beneficiaries in the event of your death. The payout can be used by your beneficiaries for any purpose, such as paying off outstanding debts, covering living expenses, or providing for your family’s future financial needs. Life insurance policies can be term or permanent, and the coverage amount and premium may remain the same or change over time.
On the other hand, mortgage life insurance is designed specifically to pay off the outstanding balance on a mortgage if the borrower dies during the mortgage term. The payout from the policy is typically made directly to the lender, ensuring that the outstanding mortgage balance is cleared and the borrower’s family can keep the property without having to worry about making mortgage payments. Mortgage life insurance policies can be decreasing term or level term, and the coverage amount is typically equal to the outstanding mortgage balance at the time of the borrower’s death.
In summary, while both life insurance and mortgage life insurance provide financial protection in the event of the policyholder’s death, life insurance provides more flexibility and can be used for any purpose, while mortgage life insurance is specifically designed to pay off the outstanding balance on a mortgage.
How To Get The Best Deal
Shop around! There are so many policy providers for mortgage life insurance and lots of online comparison sites where you can compare mortgage life insurance quotes instantly. Brokers will often complete with each other and lower their prices by giving away commission back in the premium. Sometimes this means it can be cheaper to go through a broker rather than direct to the provider. We are always happy to speak to customers and talk through the best options so make sure you give us a call.
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