What Is Decreasing Term Mortgage Life Insurance?
Decreasing term mortgage life insurance is an insurance product that is primarily designed to help you insure the cost of your remaining mortgage payments. Before you purchase this type of insurance policy, it is important that you understand a few key principles.
On the surface, this may seem like a very good way to ensure your family is able to pay off the remainder of your mortgage payment should you pass. And while this would be the case, there may be better options than this type of specialized plan.
The way that a decreasing term mortgage life insurance policy works is that it is designed to match the balance of you existing mortgage account. For most people, their home mortgage is the largest debt that they pass along to their surviving family and loved ones. This can be a tremendous burden if there is not sufficient funding once you are gone.
Particularly if you are the primary income earner in the home, it is important that you shield your family from financial ruin should misfortune strike and render you unable to provide them with the income they need. By paying off the policy through life insurance, you are able to lighten the burden that you leave behind.
This also allows you family members to continue living the lifestyle that you created for them. Many families without life insurance protection are unable to maintain the life that they had spent years building to and creating.
The way that this policy works is that the life insurance is designed to decrease as you pay down your mortgage. It will typically start at your current balance, and will decrease as time progresses. The life insurance will only cover the cost of the remaining mortgage balance for a set term (the length of the mortgage), and as such is called decreasing term life insurance.
As an alternative to decreasing term mortgage insurance, you may consider simply purchasing a term life insurance policy with sufficient death benefit to cover your mortgage at the time of inception. For not much additional cost, you can provide you family with the ability to pay off their mortgage, plus provide them with whatever additional help they need with the excess death benefit they would receive.
Make sure that you get a quote before you purchase this type of insurance, and shop around for variations on the product. You may be able to purchase a broader and more comprehensive product to benefit your family in ways other than just by mortgage payment insurance.
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