Owning a home is a dream that many people strive towards. However, it comes with a lot of financial responsibility, most notably a mortgage. One of the biggest concerns for homeowners is what would happen to their home if they were to pass away.
Mortgage life insurance is one way to ease that fear. This type of insurance can provide peace of mind by covering the remaining balance of your mortgage if you pass away. Let’s take a look at mortgage life and some benefits it can offer.
What is mortgage life insurance?
Mortgage life insurance is a type of policy that covers the homeowner’s mortgage balance in the event of their death. It provides financial security, ensuring their family won’t be left with the burden of paying off the mortgage should the worst happen.
In addition, any remaining amount can be used to cover other expenses, such as funeral costs and other debts. This can help provide a sense of security for both the family and the mortgage provider.
Types of mortgage life cover
There are several types of policies that can be used to cover a mortgage, such as:
- Whole life insurance: Covers the policyholder indefinitely, paying out a lump sum when they pass away. The money can then be used to pay off the existing mortgage balance. Both the cost of premiums and death benefit remain fixed.
- Level term life insurance: Protects the policyholder for a set period of time (i.e. 30 years). The policy expires at the end of term, unless, of course, you die at this time. The money from the death benefit can be used to help your family pay off the balance. The premiums also remain fixed.
- Decreasing term life insurance: This type of policy is often taken out when the homeowner has a repayment mortgage. The death benefit decreases in line with the outstanding balance on the loan.
- Critical illness cover: though it doesn’t cover death, it can provide financial support if you become seriously ill or injured and are unable to work. The money from the payout can be used to help cover mortgage payments or other expenses.
- Family income benefit: pays out regular monthly payments should the homeowner pass away. This can allow their family to continue making payments on the mortgage.
Benefits of mortgage life insurance
Mortgage life insurance offers numerous benefits for homeowners, including:
Peace of Mind for Homeowners
Should you pass away before your mortgage is paid off, the best doesn’t just disappear. Instead, your mortgage provider will expect payments to continue in the same way. Mortgage life cover can provide a safety net for your family, enabling them to pay off the mortgage and avoid any stress or burden.
Your loved ones won’t be left with a large debt to manage. Instead, they can receive enough money to pay it off in full.
The policy can be tailored to fit the needs of the homeowner. For example, you can choose a policy that pays out either a one-off sum or regular monthly payments. Or, in the case of term life insurance, you can choose how long the policy lasts for. You may also opt for add-ons such as a critical illness cover, in case you become seriously ill or injured.
Safeguarding against the unexpected
One thing for certain – disaster can happen at any stage. No one likes to think about the possibility of their own death, yet it’s necessary to be prepared for unforeseen events.
The life insurance policy provides security for you and your family should the unexpected happen. It can ensure that they pay the mortgage off in full, no matter what happens. This can help to reduce any financial stress or uncertainty for your loved ones if you were to pass away.
It can help cover other expenses
Your policy doesn’t have to be used to cover a mortgage alone. Any remaining amount can cover further expenses, such as funeral costs or any other debts the homeowner may have.
For example, If you have long-term cover like a whole of life policy, you may have already paid off your mortgage by the time of your death. Therefore, your family can use the money to cover other expenses.
What to consider when choosing a policy
- Cost: The cost of your policy will depend on the type of cover you choose and your age. It’s essential to research providers and compare the cost of premiums before deciding which one is right for you.
- Cover: Make sure that the policy provides enough coverage for your needs, as well as any additional features such as critical illness cover.
- Length of term: Depending on your needs, you may want to consider a short-term or long-term policy. Short-term policies may be cheaper and offer more flexibility. Whereas longer-term policies may provide peace of mind for the future.
- Exclusions: Providers often have exclusions in place, such as pre-existing medical conditions or for certain types of death. Make sure you read through the agreement carefully before signing up to ensure that it meets your needs.
Overall, mortgage life insurance can provide financial security and protection for homeowners and their families. So it’s worth considering adding it to your overall financial plan.