What Is Mortgage Life Insurance?
If you are applying for a mortgage, you may be asked the question as to whether or not you would also like to apply for mortgage life insurance, and if you are a homeowner with a mortgage, you may already have this type of insurance.
Advantages (and a few disadvantages) of mortgage life insurance
Mortgage life insurance can be an incredibly useful tool for protecting your family and ensuring that they are still able to live in the family home should you pass away before the mortgage is paid. The insurance is designed to pay off or pay down the mortgage in the event that the borrower dies. Many mortgage life insurance policies will also help to pay down the mortgage should the borrower become disabled and unable to work. And this can sometimes make the difference as to whether or not any remaining spouse or children will be able to continue to afford to live in the home.
Another nice thing about mortgage life insurance is that it will very often come with a 30-day free look period. That means you can apply for the coverage right away and get the protection for 30 days while you determine if this type of insurance is right for you. If it isn’t – and you cancel before the 30-day period is up – you’ll get your premiums refunded.
Additionally, mortgage life insurance is usually pretty easy to qualify for. There is minimal underwriting, and it won’t usually require any medical tests or examinations. This means that most people are able to qualify for mortgage life insurance even when they aren’t able to qualify for traditional life insurance due to preexisting medical conditions.
While there are several advantages to mortgage life insurance, there are a few things to be aware of however. The first is that this type of insurance only covers the amount owing on the mortgage – so it is essentially a decreasing benefit. As you pay off your mortgage, the death benefit on your mortgage insurance goes down. The second thing to be aware of is that the beneficiary of a mortgage life insurance policy is the lender – not your family.
How mortgage life insurance differs from life insurance
Oftentimes people will opt for traditional life insurance over mortgage insurance because the death benefit will go to their designated beneficiaries rather than their mortgage lender. Further, their beneficiaries may use the death benefit in any way they choose whereas mortgage life insurance can only be used for one purpose (to pay off the mortgage).
And if you are young and healthy, a term life insurance policy may not cost more than a mortgage life insurance policy.
That being said though, the application for a traditional life insurance policy will be more involved. There will be more medical questions, and you will most likely have to prove your health by undergoing a paramedical exam which will include blood and urine tests.
Call ICD Insurance today
If you have a mortgage on your home, you owe it to your family to make sure they aren’t forced to sell their home at a time when they are already grieving. Both mortgage life insurance and life insurance can provide the protection that your family needs. To discuss your options and determine which insurance is best for you, contact us today to speak to a broker.