A homeowner typically has two greatest assets: their life, and their home. Often, coverage for these two can be combined into something known as mortgage life insurance. But what is this insurance? And more importantly, is it worth it?
Mortgage life insurance is coverage that you can buy that will pay off the amount left on your mortgage in the event that you should pass away. The question is though, is it worth it? The alternative is to buy a cheap term life policy. This is a simple life insurance policy that will give your family funds to cover the costs of your funeral, your mortgage, and anything else that they need. So, what’s the better option?
The biggest benefit you’ll get from mortgage life insurance is that your family could get a big return for a relatively low investment on your part. Mortgage life insurance isn’t that expensive either, and if you have a lot left on your mortgage when you pass away, it could save your loved ones a great deal of trouble and heartache. They won’t have to make the decision as to whether or not to sell your home, and they also won’t be stuck with a large mortgage.
The biggest downside to mortgage life insurance is that it’s still term life insurance. And should you outlive that term, it’s not going to provide any benefit to you whatsoever. So is the downside to just about any insurance, with the exception of course, of life insurance. This is one benefit that life insurance has over mortgage life insurance.
If you are going to purchase mortgage life insurance, you may want to look for providers that offer return-of-premium term life insurance. These policies will return all of your paid premiums to you should you outlive the term. So if your mortgage life insurance is for 20 years, and you live past that time, the ROP policy will return your premiums to you.
Mortgage life insurance should not be confused with private mortgage insurance. That is insurance coverage that you pay for and that’s related to your mortgage; but it protects the lender, not you. Mortgage life insurance on the other hand, is money that you pay to protect yourself.
The decision between life insurance and mortgage life insurance is a big one; and homeowners are best advised to consult a mortgage broker when making the decision in order to choose the one best for them.
