Is Mortgage Life Insurance Really Necessary?

by Chris Clare

If you already have a life insurance policy, obtaining mortgage life insurance may seem like a pointless exercise, but is it?

Well, for starters, you will be providing for your family a way of paying off the remainder of your mortgage should you die before you have paid the whole amount yourself. If your mortgage of choice is a repayment mortgage, then the amount of coverage you need to allow for will lessen each year as the debt decreases. This means that you are saving each year as you only pay for the amount of coverage necessary for the remaining balance.

You can choose to buy your mortgage policy on either a joint or single life basis. When you initially start up the policy, you will be asked to specify the exact length of time it will be required to run, known as the term of the policy, as well as the total amount of coverage required at the beginning of the policy. It is also highly advisable to include critical illness cover as a factor of your policy, which will cost you a little bit more again.

Critical illness cover essentially provides a safety net should you die or become critically ill before your mortgage is paid off. The policy provider will pay the remainder of your mortgage should you die or become ill with any number of pre specified diseases which render you unable to work.

The mortgage life insurance policy ends when the specified sum is paid out as a benefit. If you are lucky enough to survive the entire term of the policy, and the amount that has been insured has not been made payable through a loss, the plan then terminates and nothing is paid out.

The policy has no cash value at the end of its term. This also means that if you select a policy good for the entire term of the mortgage, the loan has been paid off as well so you do not need that coverage any longer. If you are in the midst of replacing a policy which is currently in force, make sure that you do not cancel your current mortgage life insurance policy until you have concrete proof that the new policy is in force. This seems like a pretty simple thought, but should you cancel your current policy and, for whatever reason not be approved for the new policy, you might find yourself uninsured and uninsurable.

Your policy can run anywhere from one to forty years. You may choose to run the policy for the same length of time as the mortgage itself. It is really down to your own financial restrictions. You can have full coverage for the whole term or for just a part of it, it is entirely up to your own personal circumstances.

Remember that most of the companies that offer this coverage will allow you, under certain circumstances, to increase the amount of the coverage that you have based on certain needs and criteria. A good example would be the increase in your mortgage maybe due to a home improvement loan. If you were a single homebuyer and then got married, you may, under certain instances, be able to re-evaluate your mortgage life term insurance to match your new circumstances.

There are many well-written, web-based areas that you can find via an Internet search, which will help guide, you through your search for the proper cover and the right life insurance company that will provide your policy.

So to summarise you should always ensure that you have a life insurance policy to cover your mortgage. You should seriously asses whether or not you could benefit from critical illness cover, and you should make sure that any cover is at least for the amount of your mortgage and for the same if not a longer term than the mortgage loan itself. All these things can be clearly explained by a competent life insurance broker.

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