Mortgage life insurance

As society evolves we learn to apply caution in all aspects of our life. Insurance is a term that is still new to many countries. However in an educated society the citizens are well informed of the benefits of insuring your assets. There are various ways to protect your family in the event of a sudden death. Most people choose life insurance because it is more flexible but there are also a lot of other options. For the majority of citizens a mortgage is one of the biggest monthly expenses. Therefore if a family income were to disappear could the remaining family members handle the mortgage payments?

A mortgage life insurance is a policy that allows a borrower to pay off the full amount of a mortgage in case the other borrower dies unexpectedly. This means that if something were to happen to you, your spouse will not face the risk of losing the house. The mechanism of this type of mortgage is simple yet controversial. According to your mortgage the insurance company calculates your life insurance quotes. A very important thing that you need to understand is that although the premiums are fixed the benefits will decrease in the same rhythm as your mortgage. For example if your mortgage value is $250 000 and you die a month after having received the mortgage the insurance company will pat the full mortgage leaving your family debt free. However if something were to happen to you in the last year of the mortgage when you only have to pay a few thousands of dollars, the insurance company will only pay the remaining debt.

A lot of people are reluctant to buy mortgage life insurance because of the premium-benefit paradox. If you come to think about it, it is quite outrageous that the more premiums you pay the less money you will receive. However keep in mind that this is just an insurance. After all term life insurance often expires with no incidents which means that if you are alive after 30 years of paying premiums neither you of your family receive any money. An insurance is just a safety measure, not an investment. Therefore as the policy suggests the mortgage life insurance serves its purpose of paying off the debt no matter when you die.

Various financial specialist recommend buying term life insurance instead of mortgage insurance. The reasoning is quite simple. In the event of death you get a predetermined amount of money. Furthermore this money can be used for anything you want and not just paying of the mortgage. Maybe your family could handle paying monthly mortgage fees and would prefer to put the insurance coverage to better uses such as college tuition. However not all people are eligible for term or whole life insurance. If you have a health problem that makes you ineligible for these insurances you could still benefit from mortgage insurance.