Mortgage protection life insurance is designed to protect mortgage payments in the event of your untimely death. An accidental death is covered if the policyholder has purchased enough coverage at the time of purchase. Typically, the premiums associated with a mortgage protection life insurance policy are paid to the mortgage company directly. As such, the proceeds from a policy can not be utilized by your family as they choose. Typically, a life policy with a mortgage element is put into place to ensure that your family will have some financial security net to fall back on in case of an unforeseeable event. While mortgage protection life insurance policies can provide peace of mind for your family, be sure you understand all of the terms and conditions involved before purchasing one.
As stated above, mortgage life insurance policies are generally purchased by the lender in order to ensure that they do not lose out on the money owed to them should you die unexpectedly. Typically, your lender will require a health check, which may be conducted by a licensed physician or another doctor selected by the lender. Based on the results of this exam, the lender may require you to undergo treatment for a pre-determined period of time prior to receiving the proceeds from your mortgage loan. It is at this point that your mortgage life insurance policy will pay off the mortgage loan, assuming that you meet the terms of your coverage.
One of the most popular mortgage life insurance policies is the cash surrender value option. This type of policy gives you the opportunity to sell a portion of the cash value of the policy in exchange for a lump-sum payment. The death benefit in a cash surrender value policy is typically paid to your beneficiary in a lump-sum payment. Because the premiums paid in to secure the policy are paid over the course of one’s lifetime, the death benefit almost always has a significant amount. For this reason, some people prefer to purchase mortgage life insurance policies that offer the option to surrender the entire premium in exchange for a single premium payment.
Another type of mortgage life insurance policy is term life insurance. These types of policies are generally less expensive than whole policies and generally provide coverage for a specified amount of time. Generally, term life insurance premiums remain consistent until the policy expires, making it an inexpensive way to insure one’s family in the event of unexpected death. Depending on the type of term coverage offered, premiums may be affordable even as a monthly expense. Mortgage term life policies may also offer a lump-sum death benefit in the event of your death.
Regardless of which type of mortgage life insurance coverage for your take out, you should have peace of mind that your mortgage balance will not be touched if you unexpectedly die. With most policies, your beneficiaries will receive your remaining balance in your name. However, if you decide to cash out the monies, your loved ones cannot be denied the chance to enjoy their family’s financial stability. If you need help with the costs of continuing your mortgage balance, consider discussing these options with your broker or insurance provider.
Although the costs of mortgage life insurance policies are often higher than the premiums, it is important to consider the long-term plan of action when purchasing one. For those who can afford the premiums, it is certainly worth the peace of mind that comes with knowing your family will not be burdened by large amounts of debt after you die. Before you sign up for any type of policy, be sure to discuss all of your options with an agent or your broker. They will be able to answer any questions that you may have and help you determine which type of underwriting is best for your needs.