|
Mortgage life insurance is a form of decreasing term insurance that covers the life of a person taking out a mortgage. Death benefits provide for payment of the outstanding balance of the mortgage. Coverage is in decreasing term insurance, so the amount of coverage decreases as the debt decreases. A variant, mortgage unemployment insurance pays the mortgage of a policyholder who becomes involuntarily unemployed.
There are two basic types of mortgage life insurance policies that can be purchased. They are basic mortgage life insurance and mortgage accidental death and disability insurance.
The Veterans' Mortgage Life Insurance (VMLI) program began in 1971, The Veterans' Mortgage Life Insurance (VMLI) program provides mortgage life insurance to severely disabled veterans. It is designed to pay off home mortgages of disabled veterans in the event of their death.
In most cases if a mortgage life insurance is taken from a bank or estate agency, the benefits decrease as the principal decreases, the insured is only covered for what he or she owes on the mortgage. The premiums stay the same throughout the life of the policy.
A mortgage life insurance policy can be opened directly with an insurance company. Working with an insurance company, in most cases, offers more advantages than the policies sold by banks and real estate companies. One benefit is that the benefit amount often stays the same instead of decreasing (depending on the policy).
In most cases, the insured has the option to choose their beneficiary. Mortgage life insurance from other sources almost always names the mortgage owner as the beneficiary. Also, the beneficiary can choose how to use the money.
Companies can usually offer mortgage life insurance policies with a pre-defined option to change coverage and payment in the future, one without regard to age and health conditions.
Using an insurance company gives more options to set a defined premium or a variable one.
Since other options make the lender the beneficiary of the insured's mortgage life insurance policy, the insured person loses the policy if he or she decides to refinance with a new lender. But many insurance companies offer the option of keeping your policy even if the insured switches lenders.
One of the benefits of mortgage life insurance is that there are no medical exams to take. The policy will simply pay off the mortgage balance on the home. Though there are no medical examinations, the person seeking insurance has to answer some questions regarding his or her health.
The premiums for mortgage life insurance and mortgage AD&D policies are typically less than the premiums paid for regular types of life insurance policies. If you are on a budget, mortgage insurance may be more affordable for you.
If you have been turned down for life insurance coverage because of health problems, hazardous employment, or risky hobbies, you may still be eligible for mortgage insurance coverage.
Insurance companies like Envision financial offer the option of a disability and critical illness riders on the mortgage life insurance as well.
This article was contributed by Prerna Mordani.
|
