You Can Protect Your Home with Your Life Insurance
Mortgage insurance is often a requirement or condition that is set forth by your mortgage holder if you wish to own property. It pays the balance of mortgage to the bank if a person listed on the mortgage passes away. This type of insurance policy is generally suggested by banks while mortgage papers are signed. For some, it may seem like a great option, however, there are several downside risks involved with this coverage.
1. Even though the premiums are paid, if mortgage holder passes away, the insurance company can delve into mortgage holder`s medical history after a claim is made. For example, If you have a health condition when you sign the papers — whether you and your doctor are aware of it or not — and it is not disclosed, your claim may later be denied.
2. If mortgage holder passes away, the mortgage insurance benefits pay out only the amount left owing on the mortgage. The amount of coverage declines as it is paid down.
3. The policy needs to be re-issued every time when the mortgage is renewed, and this increases premium because we all get old.
On the other hand, Life insurance gives more flexibility since:
1. It covers policy holder for a set number of years, typically for 10 to 30 years.
2. With guaranteed fully underwritten life insurance the premiums and the amount that beneficiaries receive stays the same through the life of the policy.
3. In addition to these, it also gives flexibility to family members if it is wished to look at other alternatives, rather than paying off the mortgage. For example, if your family has other high-cost debts they want to put the money to, they can do that.
4. Finally, if you switch lenders, you'll need to take out a new policy. However, term life insurance is more portable, because it's attached to you rather than your debt.
How does your mortgage insurance stack up?