Convertible Level Term Life Insurance or Mortgage Insurance?

Buying a Home

To me, convertible level term life insurance appears to be more versatile than mortgage insurance. Did you know the former allows for greater protection? Granted, mortgage insurance has a place, but for a few dollars more in premium, why not have something better? If you are serious about buying a home, do yourself a favor and keep reading.

When we buy a home we tend to ask ourselves these questions: how will this mortgage get paid if I was to pass away without warning? Will my loved ones be able to afford to stay in the home? So to answer these questions and solve the dilemma, we look into what is known as mortgage insurance.

The difficulty with simply purchasing mortgage insurance is that it may not go deep enough into our real financial needs. Do we simply need insurance to cover the mortgage only, or do really need a product that will actually replace the income that would pay not only pay the mortgage, but also other bills associated with a family’s survival after the death of an income earner?

Mortgage insurance is form of decreasing term insurance. It starts off with a benefit face amount often equal to the current amount owed on the mortgage, and decreases in a similar fashion as the mortgage premium decreases over time. However, with this product there is nothing left over to cover the cost of liabilities or future income that cannot be generated after death.

With convertible level term life insurance there is not only enough to cover the mortgage, but as time goes on, your policy still has a benefit larger than the mortgage that can be used for income replacement. The convertibility feature allows you to “convert” your term insurance, or even just a part of it at any time to a permanent life insurance policy that will be with you the rest of your life, not just for a certain period of time.

By converting your term to a permanent life insurance policy without having to re-prove insurability, especially one that has increasing cash values, you produce flexibility in a product that isn’t simply replacing a potential loss, but rather, is able to generate supplemental retirement income, or leave a legacy and preserve an estate.

About the author: Kyle McDonald holds FIC, FICF, FSCP® & CLTC designations. His viewpoint on life insurance is simple, “Anyone with a family must have life insurance. In the end, life insurance is for others you care about, not you.” He is ready to help you and your family get the best option available. Contact Kyle today at   1-800-651-1953 or KMcDonald@Pivot.com.