Term Life Insurance Quotes
Mortgage life insurance is a life insurance policy that is designated and used to pay off your mortgage in the event of your death. It typically provides coverage for the same amount of time as your mortgage.
Subsequently, if you take out a mortgage for 15, 20, or 30 years, your mortgage protection insurance policy needs to be the same or longer than your mortgage.
If you should die during the term of your insurance policy, your insurance company pays the death benefit directly to your beneficiary, who can then pay off the mortgage.
It’s important to note, however, your beneficiary can use the death benefit for any reason they choose, so it’s critical that you and your beneficiary agree on using the death benefit to pay off the mortgage.
Mortgage protection plans are readily available for homeowners who wish to make sure that if a spouse dies unexpectedly, the surviving spouse or loved ones will have a paid-for home going forward.
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You can also assign the insurance policy to your lender as their interest appears. In this scenario, the insurer would pay the lender the balance of the mortgage, and the beneficiary would be paid any funds that are left over. This type of insurance does not cover your monthly payments if you cannot work due to a short or long-term disability. And although the death benefit was originally designated to pay off a mortgage, life insurance benefits may be used to pay off a home mortgage or other debts at the time of death.
Additionally, mortgage life insurance is also referred to as mortgage protection insurance, mortgage payment protection insurance, and a mortgage protection plan.
In almost every situation, Term Life Insurance is used for mortgage insurance coverage because it is the most affordable product available.
Types of Mortgage Life Insurance
As we mentioned above, term life insurance is the most affordable insurance product to use for mortgage protection, and term insurance can be purchased with very large face amounts very easily.
In the past, insurance agents would offer a Decreasing Term Policy where the benefit would decrease each year as the mortgage was paid down. This made sense because it was considered much cheaper for the policyholder.
Today, however, the cost for a level term policy (benefit stays the same) and the cost of decreasing term insurance is generally the same, or at least within a few dollars, so agents nowadays typically use level term insurance to fund a mortgage protection program. This way, if you were to die late in the policy term, there would be a substantial amount of money left over for your beneficiary after paying off the mortgage.
Typical Rates for Mortgage Life Insurance
Most consumers are unaware of how inexpensive a mortgage life insurance policy can be. For younger adults in good health, the cost of making certain your home is paid off is quite affordable. Here we have posted some actual rates for paying off your mortgage in the event of your death.
Here are the assumptions for this rate chart:
$500,000 mortgage with a 30-year term
Male non-smoker in good health
As you can see from this rate chart. The longer you wait to purchase your mortgage life insurance policy, the more expensive it will be. The ultimate time to purchase mortgage protection insurance is when you are 30 to 40 years old.
Broaden Your Coverage using Other Mortgage Protection Insurance Benefits.
Most term life insurance policies are designed to pay a death benefit only. They do not build cash value like whole life insurance, and they are not flexible like universal life. The good news is that life insurance protects surviving loved ones from many financial burdens, and one of the largest financial risks is your mortgage.
Most insurers now offer several riders (optional coverage) that will allow the policyholder to broaden their coverage and create a more comprehensive life insurance policy. All companies do not offer the same riders, so it’s important you check with an independent agent to make sure they have a policy that will meet your needs. The following riders can broaden your coverage and offer living benefits:
1. Accelerated Death Benefit: This rider has become one of the most popular riders available. In fact, many companies have added it to their core coverage at no extra charge. The rider provides for the insurer to advance the insured a large portion of the death benefit if they are diagnosed with a terminal illness and expected to die within a year. When the insured does pass away, the amount that was advanced is deducted from the policy’s death benefit and then paid to the beneficiary.
2. Disability Income Rider: The disability income rider is another very popular option because it is a living benefit. This rider provides for the insurer to pay the insured a monthly benefit in order to help replace lost income as a result of a disability. Many companies differ on the benefit amount and the maximum benefit, so be sure and speak with your agent.
3. Critical Illness Rider: This rider is similar to the accelerated death benefit rider, except the advance on the death benefit is triggered by the type of illness rather than the expected death of the insured. The illnesses covered depend on the insurer, so once again, check with your agent for specifics.
4. Term Conversion Rider: Although normally built into newer policies, the term conversion rider allows the policyholder to convert all or a portion of your term insurance to permanent insurance like whole life or universal life without having to prove insurability. This is a big deal if you want to turn your temporary insurance into permanent insurance after you’ve developed some medical conditions.
5. Return of Premium Rider: This rider actually converts your cost of insurance from an expense to an investment. The return of premium rider provides for the insurer to return all the premiums paid on your policy if you outlive the policy term. This refund is paid in a tax-free lump sum to the policyholder and can be used to supplement your retirement plan or for any other reason you choose.
Depending on your insurance company, there are several other riders available as well. Speak with your independent agent to discover which rider best meets your needs.
What if I sell my Home and Purchase another with a Larger Mortgage?
If you move from your current home to another home with a larger mortgage, your policy will still provide the coverage because your insurance covers you, not your home. If your current mortgage protection insurance is not sufficient to pay off the new larger mortgage, simply purchase some additional insurance to cover the difference. When the new mortgage is reduced to the amount of the old policy, you can cancel the new one or keep it in force.
If your concern is to have coverage for a lifetime, the conversion option will allow you to convert all or some of your insurance to permanent coverage. Yes, it will be more expensive because your new permanent coverage will be based on the rate for your new age, but you will not have to worry about your health since the conversion does not consider your health underwriting.
If you are concerned about aging out of affordable life insurance rates, call us now! And, if you are concerned if your current policy is sufficient for mortgage insurance protection, we would be delighted to speak with you about your life insurance needs and expectations. You can reach LifeInsure.com at (866) 868-0099 during normal business hours or contact us through our website at your convenience.
Frequently Asked Questions
Since most mortgage protection plans are created using affordible term life insurance, they are certainly worth having to ensure that your mortgage will be paid if you die unexpectedly.
Any life insurance company or insurance broker that offers term life insurance, can provide affordable mortgage life insurance.
Yes. The death benefit from a term life insurance that is sufficient to cover the mortgage balance is used to pay off the home mortgage for surviving loved ones.
Although a mortgage protection plan can be either term or permanent insurance, most people choose term insurance because of the affordable rates.
The cost of a mortgage protection plan depends on several factors:
>> The amount needed to pay off the mortgage on the home.
>> The number of years left to pay your mortgage.
>> The age, gender, and health of the applicant.
>> The life insurance company you choose for coverage.
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