Mortgage life insurance is a policy designed to pay the remaining balance on a mortgage if the life insurance policy holder passes away or is diagnosed with a terminal illness. This type of coverage is available from many sources, including from the mortgage lender when the individual closes on the mortgage. This policy has some benefits, including making sure that surviving family members are not left with mortgage payments and its ease of purchase. Some of the disadvantages include a decreasing payout amount, little control for the beneficiary, and the cost.
Mortgage life insurance is a specific type of policy for individuals who have mortgages. This is a different type of life insurance than what is traditionally sold by a life insurance company. When the policyholder of mortgage life insurance passes away, the insurance company will pay the mortgage company directly. The exact amount of the principal balance will be paid to the lender.
When an individual takes out a mortgage, he or she will be given the opportunity to get a mortgage life insurance policy from the lender. Periodically, insurance companies will also send out offers through the mail to individuals about mortgage life insurance. Homeowners can also shop for this type of coverage online.
One of the primary benefits of this type of coverage is that the policyholder will know that his or her family members will not be stuck with mortgage payments. If the individual has another life insurance policy, all that money can be used for other expenses. Some people have to use the entire amount of their payout to pay off a mortgage balance and are left with little else. With this type of coverage, that will not be the case.
Mortgage life insurance is also very simple to acquire. In most cases, individuals will not have to answer any medical questionnaires or take any exams. Instead, the individual can simply agree to purchase a policy and it will be awarded.
One of the big disadvantages of this type of policy is that it costs more than typical life insurance. An individual could easily purchase a term life insurance policy for less money. Another disadvantage of this type of policy is that it provides a decreasing payout amount. It decreases in value as the mortgage balance decreases. The beneficiary also will not have any control over what happens to the money because the money will go directly to the lender.