Mortgage protection life insurance is a financial planning instrument to ensure payment of mortgage in case of death of the ensured. It is an insurance policy that provides your family benefit of paying mortgage balance in case of your death. Homeowners need this policy because they might die someday living their family in shock especially if they are jobless or have not enough money to make the mortgage payment. They might lose the house which you so lovingly made or purchased for them, living them shelter less. Mortgage protection life insurance keeps your property protected in the event of your death, eliminating the problem of loss of the family house.
Types of mortgage protection life insurance
The type of mortgage protection life insurance depends on what type of mortgage you have. The two main types are Decreasing Term Insurance and Level Term Insurance
- Decreasing Term Insurance
The first type of mortgage protection life insurance is intended for those with mortgage repayment whose loan’s principle amount reduces over the period of the mortgage. The sum for which your life is insured matches the sum outstanding on your mortgage. This ensures sufficient money, in case of your death, to pay the remaining payment of the mortgage and saves your family from anxiety. If the policy expires while you are still alive, it is annulled and you receive nothing.
- Level Term Insurance
The second type of mortgage protection life insurance, the Level term insurance is designed for people who have a repayment mortgage and the standard balance remains equal over the term of the mortgage. The balance for which the person is insured is a fixed amount which is paid to the family if the insured person dies within the policy term. In this case also if the policy expires before the insured dies, no payment is made to the family or the insured.
Terminal illness benefit
The above both types of mortgage protection life insurance also cover terminal illness. This means if you are detected with any illness that hampers your working ability and earning money, the mortgage is cleared without waiting for you to actually die. This again helps your family in lessening the stress about mortgage repayments.
Preference over traditional life insurance policies
For traditional life insurance, the cost is calculated based on the person’s health condition and life expectancy. The premiums are less for Young and healthy people than the unhealthy or older people. This makes people worried as many might not be able to pay the high premiums and remain uninsured. In such conditions mortgage protection life insurance is suitable for them. Hence it is more beneficial than the traditional life insurance policy and pay offs are made in timely and in stress free manner. For many it acts as the only tool to save their house and hence is a home saver.