Buying a new home is an exciting time, but there are also quite a few things to think about. From the home itself to the location and everything in between, there are a lot of new decisions that will be made. One thing you may be wondering about is whether or not you should buy mortgage life insurance. If you don’t know much about this type of policy, here are four things that every borrower should know.
1. What Is Mortgage Life Insurance
Mortgage life insurance, as the name suggests, is a type of policy that pays off your mortgage in case something should happen to you. Should you pass away before it’s paid off, this will help ensure that your family doesn’t lose the house they’ve spent so much time and effort getting into. It’s important to note that not every insurance company will offer the same quote, and as the professionals from Insurdinary point out, it’s important to compare different options available to you, in order to make sure you’re getting the best deal possible. However, there are some general guidelines about how mortgage life insurance works that you should keep in mind.
You usually buy mortgage life insurance when you purchase a house or shortly afterward. The length of your policy will depend on the amount of time you have left to pay off your mortgage. You can buy one from different sources – from mortgage lenders, insurance companies affiliated with the lender, or from a third public insurance company – you can choose whichever way you find works best for you. It’s important to note though, that buying a mortgage life insurance from your lender usually means that the premiums can be integrated into your loan.
Unlike most other policies, your spouse (or anyone else you might choose) isn’t the beneficiary of this type of insurance, but the mortgage lender. What this means is that the remaining balance on the mortgage will be paid off to your lender – the money won’t go to your family. That’s not to say your family won’t benefit from it – it will ensure that they have a home that’s mortgage-free which is by no means a small thing. While a lot of the time just one person takes out this mortgage, you can have two people on it. That means that in the case where one person dies, the coverage continues on the other one.
2. How Much Cover To Get
There are a lot of factors that determine how much coverage you should get. These can include the number of people living in the home, your age, and whether or not you’ll be paying it yourself or if someone else is going to be making payments. Keep in mind too, mortgage life insurance won’t cover anything other than what your mortgage is for, so doing some budget management before you decide one way or the other is important. That means if there’s anything like home renovations or even your income taxes, you’ll want to make sure that they’re covered by other types of insurance.
The cover depends on the size of your mortgage, the time you have to pay it off, and how your debt drops over time. This means that if you’re not making regular payments or if you paid a considerable amount off already, your monthly premiums will change. If you’re over the age of 55 and not making a lot of payments, you’ll likely be offered lower premiums, as well. Even if your insurance coverage amount decreases over time, the premium will be adjusted in such a manner that it remains constant from start to finish.
The premium is usually calculated to be around 6-7% of your total payment, but this may vary depending on your specific contract, who you made a contract with, and even the country you live in.
3. What Benefits Can You Expect
There are several benefits of mortgage life insurance, however, two of them are the key ones. The main benefit of mortgage life insurance is knowing that your family will have peace of mind because they will have a home that they can call their own in the case that something were to happen to you. Any kind of mortgage payments and expenses will be paid in full and on time. Your family will be able to stay in their home if they so choose, or they will have a property of their own that they can sell if they choose to do so. In today’s house market, this is something that can hardly be overstated. Some people find that taking care of their family’s living situation brings comfort to them as well.
The second important benefit is that there are usually no medical exams to take when applying for this type of insurance. Since certain medical conditions can make the cost of general life insurance skyrocket, this presents a good alternative that allows you to still protect your family and your home.
4. Rider Options
In the context of mortgage life insurance, a rider is an addendum to the main contract. It’s important to note, that these are relatively rigid – in that, you cannot include one that states that if you want to renovate your home you can, but are for very specific types of events.
Several riders may be added to your policy including living benefits, as well as the return of your premium. Including the living benefits rider in your contract means that you can access the money from the policy if you are diagnosed with a terminal illness. Now, you should keep in mind that a terminal illness is usually defined as an illness that brings a life expectancy down to 12 months or less. Return of the premium is what we call a rider that lets you get back the premiums you’ve already paid after a certain time. It’s usually stipulated in months, and it can differ from contract to contract, so it’s important to make sure you read it in detail before signing.
Not every mortgage life insurance comes with these, so it’s important to consider what riders would be beneficial to you and to find an insurance company that’s willing to include them.
Any kind of life insurance always carries unpleasant implications that can be hard to think about. Still, you must goto over your options, research what your insurance company has to offer and make the best decision for you. Having a home is a wonderful privilege, and it’s important to make sure that if the worst should happen your family wouldn’t be left struggling. Taking care of family is important, and there are great benefits to seeking out mortgage life insurance.