If you are searching on the internet for the best mortgage life insurance or you want to know about mortgage protection plans or mortgage protection life insurance, then you have come to the right place. In order to get all this knowledge read the full post.
Mortgage Life Insurance: Protecting the Bank
For most families, a mortgage represents the largest debt of their lifetime.
Although mortgage life insurance may look good at first glance, it has
shortcomings. The big banks market mortgage life insurance like it’s a must-
have. Mortgage life insurance is similar to term life insurance. If you were to
suddenly die, suffer a terminal illness, or be involved in a serious accident, your
mortgage would be paid off (usually up to a maximum amount, say $500,000).
The banks make it easy to sign up—and make you sign a waiver so you can’t
hold the bank responsible for a bad turn of events. Once you sign up, the
premium is conveniently paid as part of your regular mortgage payments.
So far, so good, right? But here’s where
mortgage life insurance starts to take a turn for
the worse. The banks boast that you can sign up
for it without the hassle of a medical exam.
Although that may save time up front, it can
prove costly. Here’s what the bank isn’t telling
you: you might not be covered. The bank can
deny your claim if it learns you had a pre-existing
health condition you weren’t aware of or forgot to
disclose when you signed up. This is called post-claims underwriting. Only when you or your family makes a claim do you learn
you’re not actually covered.
Another shortcoming of mortgage life insurance is its declining
coverage. Even though your premium doesn’t go up on renewal, you’re paying
for less coverage as time goes on. The more you pay down your mortgage, the
less coverage you’re getting. For example, if you have a $500,000 mortgage,
you’re initially covered for $500,000 by mortgage life insurance, but if in 10
years you only have $200,000 left on your mortgage, you’re covered for only
$200,000 (if you had a term policy for $500,000, your coverage wouldn’t decline
during its term).
Mortgage Life Insurance vs. Term Life Insurance
Instead of mortgage life insurance, a far better choice for families with dependents is term life insurance.
The premiums of term life and mortgage life insurance are comparable, but term life insurance is a lot
more flexible. With term life insurance, you can pay off your mortgage, cover your funeral and help pay for
your children’s college. With mortgage life insurance, you can only pay off your mortgage. What your bank
isn’t telling you is that with mortgage life insurance, you’re paying for an insurance policy with your bank
—instead of your loved ones—as the beneficiary.
Mortgage Insurance Overview:
Basically, mortgage Insurance guarantees repayment of a mortgage loan in the unfortunate event of the policy holder’s death or disability. Usually, 12 months is the tenure of payment of such mortgage insurance (although in some cases it may be higher).