One of my worst fears is that should I die someday unexpectedly, would be my family have to sell our home and uproot my children due to their inability to pay our mortgage? Thinking of this possibility gives me that bottomless pit feeling in my stomach and it’s the last thing I would want my family to worry about while they are mourning their loss.
Luckily, with a life insurance policy specifically for my mortgage, this is a worry we no longer have.
One thing needs to be made very clear though; mortgage life insurance is simply a life insurance policy where the death benefit is earmarked to pay off the family’s mortgage. It’s nothing more than that.
Life insurance is one of the most important purchases that you’ll ever make for your loved ones. There are dozens of different kinds of insurance policies that you’ll need to look at. One of the most confused kinds of plans is a mortgage life insurance, but it’s vital that you understand the exact kind of coverage that you’re going to get.
Methods To Purchase Mortgage Life Insurance:
Purchasing From the Mortgage Company or Bank
You can purchase a policy from the mortgage company or bank you recently acquired your loan from. As a matter of fact, they may have asked that you buy mortgage life insurance as a requirement to finalize the loan. Although this is a great sentiment, they have their own interests in mind.
When you buy a policy from the bank who loaned you the money for your home, they are making themselves the beneficiary to ensure that their loan to you is paid off in the event of a homeowner’s death. That’s great and all but in many cases, it may work out better for your loved ones to receive the proceeds themselves, and not the bank. Your family may have more pressing needs than paying off the house at that time. Something you should surely consider.
Mortgage life insurance has other disadvantages as well. Often times the premium you pay is lumped into the home loan, which means you are paying finance charges on the premium. In addition, a healthy nonsmoker can usually find much less expensive premiums from an independent life insurance broker in the open life insurance market. People in premium health can even find no exam life insurance policies that are cheaper than what the mortgage company is selling you.
In addition, when you purchase life insurance from the bank that owns your home, the policy is appended to that property and is not transferable to the next home you purchase. To make matters worse, they aren’t going to work with you to design a policy that truly fits your needs and budget.
Purchasing From An Independent Life Insurance Broker
When you purchase mortgage life insurance from an independent life insurance broker, such as Life Insurance United, we specialize in all things life insurance so you can be sure we are going to design a policy to fit your exact needs and budget.
The best part of buying your mortgage life insurance from an independent broker is that you own the policy and you name your own beneficiary’s, which will be your spouse and other family members. The benefit of this arrangement is that if one of the homeowners passes away, the benefit will be paid to the surviving family members so that they can use the money for more pressing matters such as food, clothing or possibly education, if they see fit. In addition, since you own the policy yourself, the life insurance follows YOU and is not appended to a specific address for the benefit of the bank that owns your property.
So the moral of the story is that you can do better than what the bank is offering. We even had a person who purchased a FEGLI policy, which can be very expensive, and did better than what the bank was offering after fees.
How To Design A Policy The Right Way
Most individuals when they think about life insurance consider it to be a very expensive type of coverage. The truth of the matter is that life insurance can be expensive, but it doesn’t have to be! The following will be an explanation of how to design your mortgage life insurance policy with the right types of life insurance to be the least expensive as possible:
- Purchase a Term Policy
Term life insurance is the least expensive way to afford your family income protection through life insurance. Bottom line. Best of all, since mortgages are purchased for a duration of time, for example a 30 Year Mortgage, you can purchase term life insurance for the same period of time to match the duration of your mortgage. This allows you to keep cost down buy only owning life insurance for the period that you need it for. If you mortgage is for 10 years then you only need a 10 Year Term Life Insurance policy. It’s that simple.
- Request A Decreasing Policy Face Amount
Just as your mortgage debt decreases as you pay it down each year, you can design your life insurance face amount (death benefit) to decrease each year as well. Due to your life insurance policy having a decreasing death benefit it allows you to make the policy even less expensive. The reason life insurance policies with decreasing death benefits tend to be less expensive is that the life insurance company is on the hook for less money each year that goes by. As a result, they can provide you coverage at a lower rate.
Other than how your plan is designed, the largest factors dictating how much your life insurance will cost are your age, physical build and health. Like most individually owned life insurance policies you must complete a very brief health exam in order for the life insurance companies to determine your insurability. Once your application is submitted and your health exam is complete the insurance company will determine what health class you fall under which will ultimately determine how much your life insurance will cost.
Keep in mind though…no life insurance application is set in stone. Even after you have completed and signed the application you have the right to end the process and decline coverage at anytime. You can even wait till the day the life insurance company has made you an offer and still decline coverage with no impact at all to you. Don’t let anyone tell you otherwise.
On the other hand, once the policy is signed on your end, you have created a legal and binding contract between you and the life insurance company and they can’t revoke it for any reason, other than for proof of insurance fraud. You may end the policy at any time you decide to. Now that’s a deal!
So, whether you need insurance for yourself or you want to know how to buy life insurance for your parents, we can help you find the coverage you deserve.
How Much Insurance Coverage Do You Need?
Your mortgage isn’t the only factor that you should consider when looking to get insurance protection, there are dozens of other expenses that you should account for to ensure that your loved ones have enough protection.
Before you apply for life insurance, you’ should add up all of your debts and unpaid expenses that your family would be left with. Everything from your mortgage to your student loans. The primary goal of your life insurance policy is to give your loved ones the money that they need to pay off any debts that you left behind.
The factor that you should look at is your annual income. The secondary goal of your life insurance policy is to replace your paycheck if something tragic were to happen to you. If you’re one of the main income earners in your household, your family would suffer financially if something tragic were to happen. Your life insurance plan will give them the money that they need to replace that source of income.
If you have any questions about life insurance or mortgage life insurance, please contact one of our agents today and we would be happy to answer those questions and ensure that you’re getting the best plan to meet your needs. Our agents have years of experience working with applicants to get them a quality insurance plan at an affordable rate.
You never know what’s going to happen tomorrow, you shouldn’t wait any longer to get the insurance protection that your family deserves. Not having life insurance is one of the worst mistakes that you could make for your family. It could leave them with a mountain of debt and bills with no money to pay them off. It would make an already difficult situation a thousand times worse. If mortgage life insurance works for you, it’s important that you get the protection that you need, but it most cases, a traditional life insurance plan it going to be a better option, and we can help you find the perfect plan for you.