Homeowners have the choice of purchasing mortgage life insurance from lenders or insurance companies when they’re approved for a mortgage loan. This type of life insurance pays off your mortgage if you die before your home loan is paid in full. Whether mortgage life insurance is a sensible choice is dependent upon a homeowner’s finances and physical health, according to Bank Rate. For homeowners that have a health condition that prevents them from qualifying for a more affordable term life insurance plan, mortgage life insurance may be an additional alternative.
No Preexisting Condition Limitation
1 advantage of purchasing mortgage life insurance is that a homeowner can receive a life insurance plan even if she’s recorded health problems. This applies to people that are turned down to routine life insurance policies because they have a preexisting health condition. Even in circumstances when an individual having a health problem qualifies for a term life insurance policy, the premium rates are generally higher. A homeowner can’t be denied coverage for mortgage life insurance despite her history. Most times is not required to purchase a policy. A mortgage life insurance plan may also insure your mortgage if you become disabled or suffer from a painful, chronic illness. However, homeowners should always read the fine print of this policy to make sure there are not any limitations.
Mortgage Loan Approval
Agreeing to buy mortgage life insurance can help make it feasible for you to be approved for a mortgage loan. If you are putting a down payment of less than 20 percent on a home, the lender will probably require that you take out a mortgage life insurance policy or else your application for financing may be denied.
Broadly , mortgage life insurance is pricey. In reality, the rates for mortgage life insurance are typically greater than those for whole or term life insurance policies that you could purchase by yourself at a cheaper cost. Because mortgage life insurance is generally added to the cost of your monthly mortgage payment, this raises the amount of the payment.
Pays Off Just the Mortgage
Mortgage life insurance will pay off just your mortgage if you die. To put it differently, the bank or financial institution making the loan would be the only beneficiary. This means that your family members will still need money to pay off other debts that you have. If you don’t have any type of burial insurance, you’ll also need to cover the cost of the cost. Homeowners have the choice of purchasing both mortgage life insurance and a standard life insurance plan. This way you’ll have a policy to cover your mortgage and one to cover any other debts and expenses. If you decide to purchase just mortgage life insurance, your loved ones may not have sufficient coverage for debts and living expenses upon your passing. Another drawback of mortgage life insurance is that unlike other life insurance policies, you can’t borrow money from your policy.
Value Decreases Over Time
The premium for a mortgage life insurance policy does not reduce over time. A homeowner pays the exact same amount until the mortgage loan has been paid back in full. A drawback is that the value of loan life insurance actually decreases over time as you pay off your mortgage loan. The amount that the policy is worth will not be any greater than the amount you still owe on your home loan at the time you die.