7 things you may not know about mortgage life insurance
Making the leap into homeownership comes with a wide range of emotions. The joy of having your own home is often mixed with the overwhelming sense of responsibility of having your name on a mortgage.
A mortgage is a lot of money to pay back over the next 25 years or more. And if something should happen to you, would your family be able to continue making the payments?
Mortgage life insurance is designed to calm your concerns so you can relax and enjoy your new home. Here’s what you need to know about this type of policy:
1. Mortgage Life Insurance and Mortgage (Loan) Insurance are not the same.
These two types of policies are often confused, but they are quite different.
Mortgage insurance (sometimes called mortgage loan insurance) protects your bank or lender, ensuring that your mortgage payments continue to be made in the event that you are unable to make them. The coverage is the same as your mortgage amount, and it decreases as your mortgage is paid down – although the premium you pay does not decrease.
Mortgage life insurance behaves more like a Life Insurance policy in that the insurance money goes to your family – not the bank – in the event of your death. You choose the amount of coverage you want. It will never decrease even as your mortgage is paid down. Your family members use the funds to pay off the mortgage, ensuring that they will always have a home.
2. You own the policy and have control over it.
As the policy owner, you can choose the amount of coverage you want, the frequency of your premium payments, and the beneficiary. If you move to a new home, your mortgage life insurance policy can move with you.
3. Coverage starts on the day your mortgage is approved.
You don’t have to wait until the purchase of your new home closes. You’re protected even before you move in.
4. You can get an early payout if an illness is terminal.
In the case of an illness diagnosed as terminal within one year, your family can receive an early payout on the policy to help lighten financial stress.
5. Your policy covers more than your mortgage.
Your mortgage life insurance policy can pay your entire outstanding mortgage principal amount, less outstanding arrears, up to $5000,000, plus up to five years of accrued interest and any outstanding property taxes on your home.
6. Your premiums will never go up.
The cost of your insurance is based on your age at the time you apply as well as the amount of your initial mortgage. However, your premiums will never increase for the term of your policy, even as you age.
7. Mortgage life insurance is a tax-free benefit.
In the event of your death, the benefits from your mortgage life insurance policy will be paid to your beneficiary income tax-free.
Mortgage life insurance protects your family and ensures that they always have a place to call home. Talk to your Western Financial Group advisor about a policy that makes sense for you today.