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When you sign up for a new mortgage or a refinance one of the things your offered by your mortgage holder is mortgage life insurance. I find most people either sign-up for the product or disregard it entirely. Both of these choices are fine but I believe they really haven't taken the time and thought their decision through.
If they do take the coverage, they see an additional item on their monthly mortgage statement indicating the purchase but they really don't know what they are getting. It makes most people feel a lot better knowing that in case of their death, the mortgage will be paid off. This gives them piece of mind that their surviving spouse won't have the burden of paying off the mortgage or maybe losing the home because of a lack of funds to make the payment.
If you want to have mortgage life insurance it is best that know exactly what you are buying. There are many different companies offering many different types of policies it's important you know the specifics and benefits of your policy.
There are a lot of misconceptions when it comes to mortgage life insurance, buying from your mortgage company may work out fine but isn't better to work with a licensed insurance expert to verify information. Most mortgage reps are not licensed and educated in insurance. It's best to check with a licensed insurance expert before you buy.
The basics on Mortgage Insurance:
- There are several different coverage you can apply for including life (that typically pays off the balance of your mortgage if you pass away), disability (that can either pay the balance of your mortgage, or make mortgage payments for a pre-determined amount of time if you become disabled), or critical illness (that can either pay off your mortgage balance or make your payments for you, if you become critically ill).
- Any mortgage insurance that pays off the balance of your mortgage only pays that, the balance of your mortgage. So the coverage that you're provided with is a declining balance (as you pay your mortgage down over time). There is no remainder amount paid directly to you typically.
- Any benefits paid, are paid directly to the lender
- There are several different types of coverage (as with any insurance), that can include lender policies, brokerage policies, private policies. Any coverage has its benefits and drawbacks, so it's important to be informed on what you're signing up for.
- Mortgage insurance is different from term insurance, as it covers your mortgage balance only, compared with term insurance that provides you with a set amount of coverage for a specific term.
One of the benefits of buying through your mortgage company is that there is no physical check up involved. If you went the route of securing term life insurance to do the job, it is a good chance you could be turned down because of poor health. It's something to think about for those over 50 years old.
In addition, it is important to understand the terms of mortgage insurance you wished to have. "It's best to check with a licensed insurance expert before you buy" definitely!
ReplyDeleteI also would like to add,that Don’t Confuse Mortgage Life Insurance with PMI, PMI isn’t about protecting you at all – it’s about protecting the lender in case you default on your home loan. It diversifies that risk to a third party.
ReplyDeleteGreat information. Thanks for providing us such a useful information. Keep up the good work and continue providing us more quality information from time to time. Life Insurance Basics
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