Life insurance is a contract between the insurance company and the insured to pay a sum of money to the beneficiary of the policy on the death of the insured. Mortgage life insurance does just what its name suggests. Most families experience financial difficulties when the primary breadwinner dies, leaving the burden of paying off the mortgage on the surviving family members. Mortgage life insurance pays off the mortgage in the event of the death of a breadwinner. Mortgage life insurance is simply insurance that is meant to pay off your mortgage in case of your death while the mortgage is not fully paid. There is no better way to ensure that your family will have a place to live should you come to an untimely end. Remember mortgage life insurance is not a substitute for life insurance. Mortgage life insurance coverage will cease when you pay off the mortgage.
Mortgage life insurance policy evolves with the terms of the mortgage. This means that the amount of the payout goes down as the amount due on the mortgage goes down. The policy becomes worthless at the end of the mortgage term. The coverage decreases as the mortgage is reduced; however the premiums stay the same. A disadvantage of mortgage life insurance is that it may not pay anything out if your mortgage payments are complete before you die or become terminally ill. While mortgage life insurance pays off the mortgage’s outstanding balance, only the lender gets paid. You will not get any benefits. You just get to keep the house.
So do you have a viable alternative to mortgage life insurance? Believe it or not. Life insurance can be a viable alternative to mortgage life insurance. All you need is a life insurance policy with the mortgage company as the beneficiary. Now the question that might pop up in your mind is what happens if you have made substantial payments and you die before paying out the mortgage. Don’t worry. If you die at the very end of the mortgage due then the mortgage company still receives the full amount of the life insurance policy but they are required to send the family back the difference. This can take a long time but it has its advantages. Life insurance can help relieve the mortgage and at the same time add cash value to your estate for your beneficiaries. Life insurance is portable, meaning you don’t have to re-qualify for coverage during the term if you buy a new home or switch mortgage providers.
