Life Insurance Mortgage

Life Insurance Mortgage: A Valuable Lifeline

Getting a life insurance mortgage is an important step in ensuring your family’s well-being. A death in the family brings forth many challenges – there are hospitalization and funeral bills to settle and daily financial obligations to fulfil. You wouldn’t want your family to deal with the added burden of possibly losing their home.

What is it?

Mortgage life insurance is designed to help your family pay off your mortgage in the event that you die or are diagnosed with a terminal disease. The money may be paid out to your family or sent directly to your lender.

There are two main types of mortgage insurance covers. Depending on the type of mortgage that you have taken out on your home, you can purchase either an interest-only mortgage policy or a repayment mortgage insurance.

Decreasing Term Insurance versus Level Term Insurance

Decreasing term insurance is a life insurance mortgage where the assured sum is reduced in accordance with your decreasing mortgage balance. As you pay off your mortgage, your outstanding debt decreases and so does the amount you are insured for.

Level term insurance on the other hand, is suitable for a homeowner that has an interest-only mortgage. With level term, your insurance cover remains at a steady amount as the payments you make on your home cover interest only. The death benefit is a fixed amount which is paid out to your beneficiary in the event of your death. Some people favour this type of insurance as not only does it enable their families to pay for their home, there might also be some money left over that can be utilised for other expenses.

Add-Ons

You also have the option of including an additional insurance plan to your existing mortgage insurance. Most companies automatically incorporate a terminal illness cover and many do not charge an extra fee for this. This is especially beneficial as once you are diagnosed with fatal illness from which you are expected to die in less than a year, the policy pays off your mortgage right off.

Another type of insurance cover that you can add on to your life insurance mortgage is the critical illness insurance. Once you are diagnosed with a serious illness such as cancer or heart disease, you will be eligible for a payout which you can then use to pay off your mortgage. This is an excellent add-on to consider as it takes away the burden of having to deal with mortgage payments while you are coping with your health problems. GP