Is mortgage life insurance a good idea?
The primary purpose of life insurance is to replace the future income of a primary breadwinner, alleviating the financial burden survivors often face with the death of a loved one.
Other than the most common life insurance policies (term and permanent), there’s also another kind of insurance that you may have come across: mortgage life insurance.
Mortgage life insurance is specifically designed to protect borrowers on the repayment of their mortgage. It’s not the same as private mortgage insurance, which is put in place to protect the lender. With mortgage life insurance, outstanding mortgages covered by the policy would be paid off in the event the policyholder dies.
When It Makes Sense
For those with pre-existing conditions or who are uninsurable for other medical reasons, mortgage life insurance could make sense. That’s because these policies are issued without the policyholder having to go through medical screening.
It also benefits those who want to avoid the hassles of the paperwork and medical tests involved. As such, these policies are often sold for their convenience and ease of acquisition.
When It Does NOT Make Sense
For those with good health and who don’t mind paperwork, it’s more prudent to acquire a conventional term insurance policy. The face value (death benefit payout) of term policies will be much higher and the premiums are noticeably lower.
In addition, the death benefit with term policies doesn’t decrease over time like mortgage life insurance policies (these decline as the mortgage balance decreases, yet you continue paying the same premium for less coverage).
Ultimately, you’re better off having inferior coverage rather than no coverage. But in the end, it’s always best to speak with a qualified professional regarding your life insurance needs. Let us know if you have any questions...we’re here to help!