Mortgage life insurance pays a lump sum to cover a mortgage loan if the plan holder passes away within the policy term. This is a very popular form of security for couples taking a joint home loan as the remaining partner will be able to stay in their family home if the loan repayment becomes unmanageable due to the demise of one partner.
There are several important options to consider when taking out this type of cover to ensure that the cover is suitable for the loan taken.
Level or Decreasing Term Cover
Decreasing term mortgage insurance is the most suitable type of cover for repayment loans. With this form of life cover the sum assured reduces over the term of the plan so that the sum assured remains equal to the outstanding loan amount on the loan.
Level-term mortgage insurance is best suited for interest-only loans where the borrower pays only interest each month. With this form of life insurance, the level of cover remains constant over the term of the loan as the amount borrowed remains unchanged over time (no principal is repaid).
The Amount to Insure
It usually makes sense to insure at least the amount of loan debt that is currently outstanding. This way the plan will pay out enough to cover the entire loan amount on the death of the plan holder, and this is true whether the interest-only or repayment mortgage is kept as long as the appropriate type of life cover is taken out (Either level or decreasing term insurance).
The Length of Cover
To insure the mortgage over the life of the loan, the term of the life policy should be set equal to the number of years outstanding on the loan.
Guaranteed or Negotiable Rates
With this type of cover, it is possible to include a guaranteed rate option where the insurer ‘guarantees’ not to increase the premiums charged during the term of the life plan. With reviewable rates, the insurer is able to increase the premium charged as you get older or as your risk assessment changes.
Benefits of Mortgage Life Insurance
Mortgage life insurance is a type of insurance that will protect you if you are not able to make your mortgage payments for any reason, such as if you lose your job. If this happens, the insurer will pay for you. Today, with so many Americans out of work, this type of insurance is more important than ever. If you’re considering this type of insurance, here’s a look at the benefits you can enjoy when you make a purchase.
Protect Yourself Financially
When you have mortgage life insurance, if you lose your job, are in poor health, or have an accident, this plan will provide money to pay off your mortgage for up to one year. If problems do happen, and they might, you can be protected financially and this coverage can help keep you from losing your home.
Death Benefits for Your Family
Depending on the specific policy you go with, you can also get death benefits for your family in case something happens to you. If something happens and you die, you don’t want to worry about how your family will keep their home. This type of insurance will pay for your beneficiaries to ensure that they can keep their home.
Peace of Mind
Ultimately, you will find that mortgage life insurance gives you the benefit of peace of mind. When you know you’re protected, you can know that if you lose your job, you’re in an accident, or other problems happen, you won’t lose your home. This insurance will help you make those mortgage payments so you don’t add losing the home to the rest of your problems.
How to Find Mortgage Life Insurance Leads
If you are looking to find mortgage life insurance leads on your own it can be difficult to find the first time. There are some easy methods that can help you find the best mortgage life insurance leads in an accurate and fast manner.
First, you should try professions. Businesses have many employees; Hence, most people do not realize that they are providing any policy for life cover to their employees. Try small business first. But small businesses usually do not provide these facilities.
Everything is available in the market through various private firms, so mortgage life insurance is the lead. There are several companies that can guide you in finding good mortgage life insurance leads. They have agents with whom you will need to sign up and they will contact clients who are looking for life insurance services for their employees. You can also find these firms on the Internet. Just enter the search engine and find one.
Another good place to look for insurance leads is college. There are many students who are ready to spend money on anything because of a lack of appreciation for money. An easy way to reach them is by setting up booths at college fairs. This is also a good way to build a reputation for yourself.
How Much Mortgage Life Insurance Cover Should You Take
It’s no secret that mortgage lenders strongly encourage their borrowers to take out mortgage life insurance to protect their investments. However, it is also the case that many mortgage holders want to take out life insurance to protect their family’s financial stability. As a result, it should be seriously considered when deciding how much cover to buy. Below are several factors to consider when deciding how much mortgage life insurance is needed.
Total Mortgage Loan Outstanding
Figuring out how much is owed on the mortgage loan is a natural place to start when deciding how much cover to buy. Although this is not the maximum that can be insured, it does provide a basic starting level of cover to consider before adding or reducing the level of life cover. The outstanding loan amount is the total potential financial liability faced by the borrower(s) and is therefore a good reference point for an appropriate level of cover.
Company Provided Insurance
Sometimes it happens that an individual company may provide them life insurance. The amount of cover provided is usually calculated as a multiplier of the annual income. If this is the case then an individual needs to decide whether the amount provided is sufficient to cover their mortgage loan and provide financial security for their family. There is no point in paying a premium every month for a separate mortgage life insurance policy if the level of coverage is adequate.
Saving and Family Protection
If a person has sufficient savings, he may not need to take cover for the full amount of his mortgage loan. In this case, the individual’s family can use the payments from the mortgage life insurance to grow their savings and then pay off the loan. However, it is also important to consider the financial situation the family will be left with upon death, especially if the savings are to be used to pay off the mortgage loan. A person may decide that it is better to leave the family savings intact and take out mortgage protection cover instead.
It is not unusual for individuals to take out life insurance cover in excess of the outstanding balance on their mortgage loan. The reason for this is to provide additional family protection on death. There is no condition that the amount of cover withdrawn cannot exceed the outstanding amount on the mortgage loan.
As a result, it is perfectly acceptable to take out additional family cover over and above the mortgage amount, which may be particularly suitable if the family’s savings levels are low. Of course, it is also possible to have one life insurance policy to cover the mortgage and another life insurance policy to protect the family.
Thus, it is important to establish the appropriate level of cover before purchasing mortgage life insurance, which may not always be equal to the outstanding amount on the mortgage loan. It is also important to consider family savings, family protection, and company life insurance if provided.
Types of Mortgage Protection Insurance
In a recent survey by the Association of British Insurers (ABI), term life insurance (also known as life insurance) was found to be the most popular form of personal protection insurance (ABI Savings and Protection Survey Q4 2023). On average, 47 percent of the sample of working respondents had life insurance policies in the past six quarters.
Life insurance is a highly customizable type of policy, which pays a (usually) tax-free lump sum amount on death. In general, there are two main reasons to have life insurance: family protection and mortgage protection. There are two different types of policies available within family protection, whole life insurance (which is guaranteed to pay because the term of the policy is until death) and level term insurance (which provides life insurance for a specified period of time.
Life insurance is also commonly held for mortgage protection purposes. Although home loan lenders do not make it mandatory to purchase life insurance, some lenders are known to charge higher interest rates than those who do not. There are two main types of mortgage life insurance available, level term insurance (used to protect an interest only) and decreasing term insurance (used to protect loan repayments). Decreasing term insurance has been in less demand over the years as the number and proportion of mortgage-only loans approved have decreased.
The ABI survey also found that mortgage payment protection insurance (MPPI) was a popular form of home loan cover. This type of policy was held by 16 percent of working respondents in the last six quarters. Given that the sample includes both homeowners and those living in rented accommodation, a sample segmented by homeowners only would produce a significantly higher proportion of MPPI holders. MPPI (which guarantees your loan payments if you were out of work due to accident, illness, or unemployment) has become increasingly popular because of the risk of redundancy during these difficult times.
