We often receive a lot of advices about getting different types of insurance that will fit our lifestyle, work, business, and possessions. Most of the insurance policies that people are aware of are for the assurance of the policyholder, but some insurance policies will also cover the family members, the baggage’s in travel insurances, the properties and other parties involved in the accident in the case of auto insurance, and the lender in private mortgage insurance.
However, one type of insurance that some consumers may consider, especially if they have an existing mortgage loan is mortgage insurance. It should not be a surprising fact if a lot of readers will find themselves unfamiliar with this type of insurance since, it is only applicable to a specific type of consumers. But should anyone want to find out more specific details about the life mortgage insurance, they should easily be able to do that by searching online.
What is a life mortgage insurance?
To give a quick overview, a mortgage life insurance is availed by a mortgage loan borrower to assure his family members’ continuous ability to repay throughout the life of the mortgage. The value that the life mortgage insurance can cover should equal that of the outstanding capital balance on the loan and the life mortgage insurance policy’s end of term date should coincide with the due date of the final payment on the mortgage.Pros and Cons of Life Mortgage Insurance
Unlike other types of insurance, some people would normally make a couple of discernments if getting this type of insurance makes sense. Although life mortgage insurances have benefits, it also has its own set of disadvantages.Pros
1. No pre-existing medical condition will cause the applicant to be turned down: A homeowner will be granted with the life mortgage insurance policy even he has pre-existing health problems, even if these health conditions have been the cause of being turned down by other life insurance providers or making the premiums cost higher if they are allowed for a regular life insurance policy. Also, most of the time, no medical examinations will be required when applying for this type of policy. 2. Gives assurance to family members: In case of the unfortunate event of the policy holder’s death, the insurance company will cover the loan to the bank, leaving the family members with nothing to worry about paying the remaining repayments on the loan. 3. Faster and easier loan approval: The fact that the lender can get some form of assurance that he will be paid in the event of the borrower’s untimely death can increase the borrower’s chance of approval. A mortgage loan insurance can also increase the borrower’s chance of getting an approval, if he can give less than 20% of the house’s price as down payment.Cons
1. Through time, the mortgage life insurance’s value decreases while the premiums are fixed: The premium’s rate does not change. However, the value of the mortgage life insurance decreases since the policy will normally state that the insurance company will cover for the remaining capital balance at the time of claims. So, if the policyholder has already made a lot of repayments, the insurance company will only have to settle for what is left, in case the family members will have to file a claim from the borrower’s policy. 2. Beneficiaries have limited control as to the proceeds from the claims: Unlike with life insurance policies where the claims will be granted to the family members, the proceeds from a mortgage life insurance policy will go directly to the bank. Although the family will be relieved from the remaining repayments to the mortgage loan, there’s no other choice as to how and where they will apply the proceeds from the claim. 3. Higher cost: Premiums for mortgage life insurance are usually higher than regular life insurance policies. The verdict as to whether a mortgage life insurance is advisable or not will depend upon a lot of factors such as the borrower’s financial status, health circumstances, family members, etc. But by getting to know the pros and cons, it should be easier to make an informed decision about getting this type of insurance.Blog Category