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Mortgage Life Insurance: Through the bank or on your ownWhenever you apply for a major loan at a bank, the bank officer will usually quote and encourage you to accept life or life / disability insurance on the loan. This is a type of term insurance, calculated to last for the term of the loan that would pay off the bank if you were to meet an untimely death. In the case of disability insurance, the money would be paid to the bank if you were to become disabled and unable to make your payments. The disability insurance is less common, but you can get a life insurance policy on almost any large loan you apply for. Mortgage protection life insurance is also a type of insurance that pays the bank if you should die. Usually, there is no money for your survivor. The purpose of the insurance is simply to pay off the mortgage so your loved ones will not lose their home. Most mortgage insurance is also decreasing term, which is why there is no money left over even if you have been paying for 15 years on the mortgage before you die. Decreasing term is very inexpensive for surprisingly high face values; however, while the premium remains level, the death benefit drops each year, keeping pace with the drop in principle as your loan is paid off. So, you pay a premium year in and year out, and if, on a 20 year loan, you die in year 19, most likely the benefit will have decreased so that it will do nothing more than finish paying the mortgage. Mortgage insurance is not a bad thing; it is usually convenient to pay because the premium is bundled with your mortgage payment, and you have the security of knowing the family will have a roof over their heads if something happens to you. However, even if mortgage insurance is what you want, you will probably find a better price by going to a private insurer than by accepting what the bank offers.Private Mortgage
Insurance Mortgage Life
Insurance A better option, however, is to check into the possibility of a Term Life policy with a term at least as long as the expected duration of your loan. The premium payments are low for a high face value, and as long as you get level premium / level benefit, neither your premiums nor your face value will change until the term expires. Since your outstanding balance due will drop over time, there will be money left over if you should die. While the bank may expect to be the primary beneficiary, your loved ones can be contingent or even shared primary. The bank will be paid first, but money left over will help your family pay other bills while adjusting to life without you. Of course, if you purchase Term Life, there will be no cash value, and you cannot borrow against it, but that might not be important if your purpose in buying the insurance is to have a way to pay off the mortgage and other bills.
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