UNDERSTANDING THE CONCEPT OF MORTGATE INSURANCE POLICY

Understanding Mortgage Life Insurance

Mortgage life insurance is designed with one specific goal: Compensate the remaining balance on your home loan in the event of your death claim

Mortgage life, also known as mortgage protection life insurance, is designed differently than traditional term insurance in that of the actual amount of coverage been purchase initially decreases the amount of your loan to the mortgage lender is paid down. Be Pensive about as decreasing term insurance.

Mortgage life insurance is originally offered by banks and lenders during the mortgage application process. This type of insurance can also be acquired through independent sources such as traditional insurance providers.

Mortgage life insurance is a type of life insurance that is in effect for a periodic life span — in this case, the amount of time remaining to pay off the mortgage loan. However, the insurance can only be used for paying off the mortgage. And like traditional term insurance, the surrender value of insurance policy goes away at the end of the term if the policyholder is still alive. In the case of mortgage insurance, the mortgage is paid off.


Comparing Coverage and Purpose

Mortgage life insurance and traditional term life insurance do the same thing: They provide financial protection when the policyholder death claim. But they get there in different ways.

Mortgage Life Insurance Coverage

With mortgage life insurance, you pay a monthly premium that keeps your coverage in checks. When the policyholder dies during the term of the insurance, most policies will pay the death benefit directly to the lender in the amount of the monthly mortgage payment until the loan is paid off. So, unlike term life where a family member is typically the beneficiary, the beneficiary with mortgage protection insurance is the lender. loved ones benefit from the insurance in that the loan balance will be paid down in full in most cases.

If necessary, consult a licensed insurance agent for advice.

Term Life Insurance Coverage

Term life insurance has a broader application than just a mortgage. Most people purchase a fixed amount of term life insurance to protect a broad range of things, such as a mortgage, large debts, financial obligations, health care and child care. As long as you are current with your regular premium, the full amount of insurance will be paid to your beneficiaries when you die.


Premium Costs and Affordability

Like most insurance, the cost of mortgage life insurance is based on several factors. Most important is the remaining balance of your mortgage loan and the time left on the loan. The policyholder’s age also impacts the premium. A young male or female under age 30 with a $300,000 loan balance can expect to pay less than $50 a month. Conversely, a male or female near 60 years old can expect to pay several hundred dollars a month.

Term life insurance takes in many more factors than mortgage life insurance including age, gender, health, smoking status, occupation, family history and more. A term life application goes through more rigorous underwriting than mortgage life insurance and usually includes a life insurance medical exam. A 30-year-old male will pay about $426 a month for a $385,000 20-year term life insurance policy. A 60-year-old male will pay about $2,000 or more. Females pay a little less in general.

The key factor to remember here is that the term insurance payout can be used for anything by the policyholder’s beneficiaries. The payout from a mortgage life insurance policy typically goes directly to the lender; no money is paid to the policyholder’s family or loved ones.

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