Mortgage Life insurance policies are not for everyone. These policies normally get offered prior to signing of your home mortgage. Mo Matter what someone might have told you these policies are not required when purchasing a home. There is no doubt that the bank lending you the money will be more than happy if you purchase one and might even lead you to believe how very important it is. These policies protect the lender as much as they protect you except you end up paying the bill. Protecting the well being of you and your family are always recommended but there are other options at your finger tips that you may want to consider instead. Here is a breakdown of some of the pros and cons of having mortgage life insurance and some of the other options that are available.
Pros of Mortgage Life Insurance
These policies kick in if an untimely death may occur to the mortgage holder. If this should happen the mortgage gets paid by the policy and your family can stay in the house. Many people will tell you that this helps the bank or mortgage holder more than it helps you. It is true that the bank does benefit as they will get paid from the insurance policy and the mortgage will get paid. Your family also benefits because they get to stay in the home that they now own. The major difference between this and a life insurance policy is that you do not have any say with mortgage life insurance as the mortgage will automatically get paid and your family does not have a choice of what to do with the money. Life insurance gives the power to the policy beneficiary who can take the money and pay of the mortgage as well or can take the money and hold on to it and just keep paying the mortgage payments on the home.
Cons
Mortgage life insurance policies have level premiums with a decreasing benefit. This means that as you get closer to paying off your mortgage payments there is less that you owe toward your principal. This means that as you make payments over time you end up owing less money. The problem with this is that mortgage life insurance policies have level premiums that do not adjust based on the payments that you have already made. You may the same amount throughout the policy. This is not great for you as you pay high premiums and get a decreasing benefit.
Key factors to Consider when Buying a Policy
Statistics show that more than 50% of homeowners refinance their house, normally with different banks who offer better rates, over a period of time. If you decide to buy a mortgage life insurance policy you will have to go through the process again of being approved. This means if you have any health concerns you may not get approved for a new policy. You will have to succumb to the normal medical questionnaire as well as underwriting. This can be devastating as in many cases so homeowners are not told this. If you are sick with some sort of potentially fatal illness you will not get a new policy. It does not matter that you had a previous policy and were approved 5 years prior. Mortgage life insurance policies due not rollover if you decide to refinance your mortgage with another bank. Mortgage life insurance rates may change as you get older as you become a higher risk.
Mortgage life and disability insurance can be great options for you to protect your family. Mortgage life protection can be valuable in a time of need but is only one of many options that you have. We would recommend that if you are interested in some sort of protection that you get a few quotes from insurance companies. We would also recommend that you get life insurance quotes to get a compatible idea of what options you have available. Life insurance might end up being a better option for you and your family as policy rates are normally comparable and offer you more control of your finances.
