Mortgage Life Insurance
Mortgage Life insurance is generally referred to as the life insurance that is designed, or used, to pay off an outstanding mortgage in the event of a person’s death. The type of life insurance that is used in most cases is some form of term insurance or temporary insurance.
When people get a mortgage from a traditional lending institution they are usually offered “mortgage protection insurance” of some type. More often than not, it is life insurance that would pay the mortgage debt upon the death of the person or persons that have the mortgage. People can decline the coverage offered by the lending institution and take out their own personal coverage. There is an interesting comparison chart available here, to see some of the differences between individual coverage vs. the insurance that is offered thru a traditional lending institution.
When mortgage insurance products were developed over 50 years ago, believe it or not, people paid their homes off over a 15-20 year period. They stayed in one home, barely moved, and never considered renovating or additions until they actually owned their home free and clear. They never had revolving debt or secured lines of credit. Their reducing debt was predictable and insurance coverage usually decreased, at the same rate as the mortgage. Life was different. Boy, have times changed. Watch this short video on Mortgage Insurance.
The Benefit Guys’ experience shows that most people have actually increased their mortgages over the last 10 years. People have been using their equity to enhance their personal lifestyles. What do you do to make sure your mortgage is paid if anything happens to the breadwinner or breadwinners in the family? We suggest you use some very inexpensive level term insurance with a guaranteed premium over a 10 year period. This type of insurance will keep the same amount of life insurance coverage over a reasonable time frame at an excellent cost. It is the least expensive way to cover that risk. It is also the most flexible for future family planning.
For families that have two incomes, it is obvious that there is a financial contribution by both spouses to pay the mortgage, so both should be insured. How would you deal with a “stay at home and raise the kids” spouse? We say spouse, because today, the stay at home spouse is not necessarily a woman. A person does not have to be bringing in an obvious earned income to apply for life insurance/mortgage insurance. The value represented by the stay at home spouse, from caregiver to teacher, to cook, to shuttle driver, to after school helper, you guys know the drill, is incalculable. Life would change drastically if a stay at home spouse were to die prematurely, and not just in the area of money.
The non-working spouse can easily take exception to the “non-working” term used. And we don’t blame them. A better term would be, “a non obvious revenue generating spouse”. All parties contribute in family dynamics today. If either adult were to die prematurely, in a family relationship, there would be hardship, and financial hardship would be felt all of the way around. A lot of people, when reviewing their family finances today, want to be sure that they have enough money to pay off the mortgage, pay final expenses and have a “readjustment fund” available that would replace at least five years of income of a deceased parent.
So when thinking of mortgage insurance, keep in mind, when you have individual life insurance that is “intended” to pay off the mortgage it is often referred to as mortgage insurance. The big difference between private coverage and institutional coverage is that you control how much money is paid, to whom it’s paid, and when it’s paid. There is a lot more flexibility than “institutional” mortgage insurance.
If you would like a specific question answered, or want a mortgage insurance quote, The Benefit Guys can help you, by all means feel comfortable to complete the Client Data page and one of The Benefit Guys will quickly get back to you by your preferred method of contact.