Are you paying for a mortgage that would last many years more? You should consider applying for and getting a mortgage protection life insurance. As the name implies, it is an insurance product that is specifically designed to shoulder the mortgage debt of the insured in case of his/her early or unexpected death.
“This policy gives complete protection of mortgage”
How This Insurance Policy Works?
While in a traditional life insurance policy, benefits are claimed and paid upon the policyholder’s death, in this kind of policy, the benefit could only be paid if the borrower dies while there is still an existing mortgage. The idea is to cover the remaining mortgage cost upon an unexpected or sudden death of the borrower, who is also the life insurance policy owner.
This may mean that the moment the mortgage is fully paid; the life insurance policy may be terminated. However, there are several life insurers out there that are willing to keep the life insurance and make adjustments to benefits in case the mortgage is already fully paid upon the death of the insured.
Types of Mortgage Protection Life Insurance
You can choose from two types of this special kind of life insurance—decreasing term and level term. There is a big difference between the two and selecting the right one for you may depend on several personal factors.
Decreasing term mortgage life insurance is the type wherein the scale of the policy or the premium paid decreases along with the outstanding balance or your home loan. At the maturity of the mortgage, the life insurance policy and face value also reaches zero and is terminated.
In the level term life insurance, the scale of the policy is fixed or remains the same all throughout the lifespan of the mortgage. In comparison, the regular premium paid here could be initially lower compared to the premium in the other type. This is also the reason level term life insurance is recommended to mortgage borrowers who have an interest-only loan.
Possible Age Limit
Usually, this type of life insurance might consider age limitations. Such a policy may not be made available to some people who reach a certain age. This could be for obvious reasons that when a person gets past the retirement age, it may not be advisable to continue shouldering amortizations for home loans.
For instance, some insurers that offer such products would not provide mortgage protection to applicants who are over 50 years and who are paying up to 30 years of home loans. The age limit could also vary per location.
Overall, prior to investing in this type of life insurance, you must carefully and honestly assess your personal finance. Take a closer look and analyze the policy’s terms, costs, and total benefits. When choosing and buying such a policy, always remember to ultimately consider your own lifespan and the lifespan of the mortgage.
You may consult with a reliable life insurance advisor to understand this product more and to weigh in several options available for you.