Mortgage Life Insurance: Good Rates for Homeowners with Medical Issues
During the process of obtaining a mortgage, you will likely be offered mortgage life insurance, either by your lender or affiliated companies. Mortgage life insurance offers enough coverage to pay off your mortgage in case you pass away, so that your family will not have to move. If you’re not interested in coverage, don’t worry, life insurance is not necessary in order to obtain a mortgage.
If you are interested in getting life insurance to cover your mortgage, whether mortgage life insurance is the right policy for you depends primarily on your health. Young homeowners that have limited medical issues will get better quotes and greater coverage options with term life insurance. On the other hand, if you have severe enough health problems to not qualify for term life insurance, mortgage life insurance will offer larger death benefits than many alternatives.
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Mortgage Life Insurance Coverage
Mortgage life insurance, or mortgage protection insurance, refers to a set of life insurance products that are designed to pay your outstanding mortgage balance in the case you pass away. This coverage is often offered by your bank or mortgage lender, but can also be purchased through unaffiliated insurers. Since so many parties offer mortgage life insurance, the structure and benefits can vary significantly and it’s important to check the terms of each policy individually.
Mortgage life insurance policies have a specified period of coverage, generally 15 or 30 years, and the death benefit can be structured in one of 3 ways:
- Decreasing: The death benefit may be fixed for the first few years of coverage, but then decreases at a specified rate over the life of the policy. This is meant to mimic the rate at which the mortgage is paid off.
- Mortgage Principal: Some policies tie the death benefit to the outstanding mortgage principal. This will behave similarly to a decreasing death benefit but, if you pay off your mortgage faster or slower than expected, the policy will reflect that.
- Level: The death benefit will remain the same over the life of the policy. This may be ideal if you have an interest-only mortgage, since the principal remains the same.
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