The purchase of a home is generally the largest purchase of people’s lives. Mortgage life insurance is purchased to pay off the outstanding mortgage amount upon the death of the insured. This means that surviving dependents will no longer have to worry about mortgage payments.
Mortgage Life Insurance
Mortgage life insurance provides a lump sum payment at the death of the insured individual. This payout is specifically meant to pay off the mortgage on a property. The beneficiary of a mortgage life insurance policy is whoever holds the mortgage on the property (the lender or bank). This is so the money is assured to go directly to the mortgage instead of having a family member pay off the mortgage month by month. There are two basic types of mortgage life insurance – decreasing term insurance and level term insurance. It is best to check with the insurance provider to see which policy would suit individual needs.
Decreasing Term Insurance
Decreasing term insurance on a mortgage life insurance policy is meant for mortgages that pay off interest and principal every month (a repayment mortgage). The premium amounts for a policy of this kind are higher at the beginning when the mortgage amounts are highest and lower towards the end of the policy when the mortgage amount is much less. The amount of coverage also decreases over time because the lump sum payment at the end of the policy (if death occurs) would be much less as the years go by.
Level Term Insurance
Level term insurance on a mortgage life insurance policy is meant for mortgages that are interest only and have the principal due at the end of the mortgage. The premiums for this type of policy remain the same over time because the lump sum payment at the end of the term (if death occurs) would remain the same as the years go by. The type of mortgage an individual has on the property will help to determine which kind of policy would be the best fit.
Additional Coverage Options
Different insurance companies will have a range of additional products that can be added onto mortgage life insurance policies. These additional add-ons include:
• Critical Illness Benefit – this policy allows the insured individual to receive a payment to continue paying in the event of a diagnosis of a critical illness included in the critical illness policy such as cancer, multiple sclerosis or stroke.
• Return of Premiums Benefit – this type of policy costs significantly more than others but pays back all premium amounts at the termination of the coverage period.
• Mortgage Payment Protection – this type of policy pays the monthly mortgage payments in cases of disability, sickness or unemployment.
Each insurance company will have a range of different riders that can be added onto mortgage life insurance with different specifications. It is best to check with the insurance company of choice for exact terms and conditions before purchase.
Joint coverage is available from many companies offering mortgage life insurance. These policies are generally shared between spouses and may be a much more affordable option. There are two different payout options for joint mortgage life insurance – first death and second death policies. First death policies pay off the mortgage after the death of one spouse so the surviving partner has no mortgage costs whatsoever. Alternatively, a second death policy pays off the mortgage after the death of the second spouse. The choice for joint coverage and between the two different types can make a big difference to premium amounts.
The costs associated with mortgage life insurance vary widely from person to person and from policy to policy. However, insurance companies look at a number of different factors including:
• Amount of coverage purchased – this often depends on how big of a mortgage the insured person has
• Type of insurance policy desired – any additional coverage, joint or separate policies, level term, decreasing term, etc.
• Age of the person insured
• Medical history
• Gender – men generally have higher premiums because of their shorter life span and different lifestyle patterns
• Occupation – some occupations are deemed to be “more risky” than others such as fire fighters or construction workers
• Hobbies and interests – some hobbies, such as scuba and rock climbing, can make premium amounts higher
• Smoking status – people must be tobacco free for at least one year to be considered a non-smoker
• General health – such as weight, blood pressure and cholesterol levels
Check with individual insurance companies for their specific determining factors for premium costs.
It can be tempting for some to not give the whole truth to insurance companies to try to have lower premium payments. Some people may not qualify for any insurance whatsoever when they fully disclose all pertinent information which makes it even more tempting to skip pesky details. However, people who do not fully disclose their situations to insurance companies can forfeit their rights to receive any benefits from the insurance policy whatsoever. It is absolutely paramount that people tell the completely truth to insurance companies to make sure that their premiums are not wasted. Holding back details from insurance companies is fraudulent and nullifies the policy in its entirety.
Mortgage Life Insurance Quotes
It is important to get quotes from a number of different insurance companies to get the best possible mortgage life insurance policy at the best price. Our service makes it easy to obtain life insurance quotes from the leading providers in the UK by filling out a free, no-obligation online form. Our qualified experts will get back to you right away with the best policies and the best prices to get the coverage needed.
Mortgage life insurance can help ensure that surviving family members do not lose a much loved and invested in home at the death of a family member. The policy pays out directly to the mortgage provider meaning that there is no need to worry about any inheritance tax issues. This type of policy can provide people with the peace of mind needed to protect their largest investment – their home.