mortgage life insurance

Mortgage life insurance is a type of insurance designed specifically for holders of mortgages on their property. The policy is issued as a guarantee to the financer of the mortgage they will be paid by the insurance company if the property owner were to pass away unexpectedly. If the policyholder were to die before the end of the mortgage the financer would be paid a sum that is equal to the balance due on the mortgage. However if the policyholder outlives the mortgage, they would drive no benefit from the insurance premiums paid.

It is always good to have mortgage life insurance if you are sitting on a huge sum that has to be paid to the financers. In the event of your untimely death the interests of your family will be protected. They will not have to run from pillar to post trying to make monetary arrangements for the monthly payments of the mortgage. The insurance company would take care of any balance that was left outstanding at the time of your death. However there are some disadvantages here as well, which have to be looked into before you decide to invest in mortgage life insurance.

Insurance companies issuing mortgage life insurance usually stipulate that no payments will be made out if the policyholder were to die within six months of purchase of the policy. This rule is applied regardless of the situation and leads to complicity if a person were to die in an accident. The insured, in this case the financer of the mortgage would not receive anything from the insurance company, which implicates that they would try to make a recovery from the policyholder’s family for the outstanding amount or look to foreclose the property.

Mortgage life insurance does not take into consideration any pre-existing illnesses you may have had when purchasing the policy. Death arising out of pre-existing conditions will render the policy void and all claims made thereafter will be rejected.

It must be understood that any coverage offer by mortgage life insurance decreases in value over a period of time. The value of the insurance stays in line with the mortgage payments outstanding. However you will still be required to pay a fixed premium till the end of your mortgage. This in effect means that you will be paying more for lesser coverage, which can be a big disadvantage.

Having spoken about the disadvantages it would be unfair to state that there are no advantages involved if you purchase mortgage life insurance. The fact that your mortgage will be taken care off by the insurance company leaving a roof over the heads of your family is perhaps the biggest advantage that such insurance offers. Providers of mortgage life insurance do not stipulate stiff conditions on policyholders regarding their health when compared to other forms of life or health care insurance. Other policies will require you to pay higher premiums or even disqualify you from purchasing a policy if you show signs of serious health impairments. This is not the case with mortgage life insurance.

Mortgage life insurance even goes to the extent of helping people who are diagnosed with terminal illnesses. You must however opt for such cover when you buy the policy and may also be required an extra premium for the same. However if it is diagnosed that you stand a chance of passing away within 12 months or are ill enough to be bedridden, the insurance company will make payments to the beneficiary of the policy, in this case the financer to clear off the mortgage.

Mortgage life insurance is not without its faults. However it still has advantages which can safeguard the interests of people buying the policy.

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