Protect Your Family With Mortgage Term Life Insurance
For individuals concerned about leaving mortgage payments to their loved ones after they pass away, insurance and mortgage companies offer a product called mortgage term life insurance. Mortgage term life insurance is simply a term life insurance policy that is established to pay off the remaining home mortgage balance after the passing of the policy owner. This type of policy can be a very beneficial to the account owner, and provide added comfort knowing your affairs will be in order after your passing.
Similar to mortgage protection life insurance, the policy is based off of your current home mortgage. The mortgage companies introduced this product as a way to protect themselves from accidental deaths causing foreclosures on the mortgages they cover. By offering a product that guarantees payments of the mortgage through life insurance, both the individual and the mortgage company are protected from foreclosure risk.
What is the Major Appeal of Mortgage Term Life Insurance?
One of the most appealing parts of the mortgage term life insurance policy is that it is often obtainable without a medical exam. Similar to other no exam life insurance policies, the insurance company makes up the difference elsewhere in the contract. They understand that this type of policy can inherit an additional degree of risk, and so they either offset that risk with increased premiums, or other account restrictions.
Regardless of the insurance company's risk factor, this type of mortgage term insurance allows you to get coverage regardless of your ability to qualify for traditional life insurance policies.
How Does a Mortgage Term Life Insurance Policy Work?
A mortgage term life insurance policy is often created to have a decreasing death benefit as the mortgage is paid down over the life of the policy. As such, you will often hear this type of contract also referred to as decreasing term mortgage life insurance. And while this is the most common form of this insurance, you can find mortgage life protection that doesn't have decreasing death benefits.
When the policy owner dies, the death benefit is then paid out to cover the remaining balance on the mortgage. This is a straightforward type of insurance contract.
Mortgage term life insurance is often used in conjunction with other types of high risk life insurance. If a financial planner knows that their client is uninsurable, they may begin to look at several different no exam life insurance policies. There is often no limit on the number of these policies you can have, so a combination of a couple policies often leads to the most comprehensive coverage.
A frequent alternate type of life insurance that can be used in conjunction with mortgage term life is burial insurance. Burial insurance is established to pay for the cost of the funeral upon the passing of the account owner. Used simultaneously, both the mortgage payments are covered as well as the cost of the funeral. This can take a huge burden from the shoulders of the remaining family and friends of the deceased.
What Are Your Mortgage Term Life Insurance Alternatives?
In recent years, more and more people are bypassing the traditional mortgage term life insurance contract to go with return of premium life insurance. This type of policy functions exactly as it sounds. Upon the contracts end date, at the end of the term, the policy returns the premium payments to the owner (assuming the owner doesn't die during this period).
This is good alternative for a number of reasons. The first reason is that return of premium life insurance policies do not have decreasing terms. You either receive the full death benefit or you receive the premiums you paid into the contract back. The second reason is that in recent years the returns on this type of term insurance have been better. The rates for ROP life insurance have made this insurance product more attractive.
Regardless of the type of insurance contract that you choose to go with, you should plan to have your mortgage paid off at your passing. This can take a heavy burden from you loved ones and allow you to provide for them beyond the grave. Mortgage term life insurance is an excellent alternative for those individuals that normally wouldn't qualify for life insurance.
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