What are the Life Insurance Options to Cover a Mortgage When Buying a Home?

Buying a Home

Life insurance to cover your mortgage? What are you talking about, you may ask. You’ve worked hard and saved to buy your dream home. It’s time to celebrate and enjoy your new home (and not think about additional costs)! Like most people, you may have taken out a mortgage, which is probably the largest debt you have ever had. You will probably start receiving a barrage of letters from life insurance agents about life insurance to cover your mortgage. You have experienced a lifestyle change that created an immediate need for life insurance to pay off the mortgage to allow your loved ones to remain in your dream house. As some say, “I don’t own my home, the bank/ mortgage company does”. You may receive letters suggesting you buy mortgage life insurance or mortgage protection life insurance or term insurance to pay off the mortgage in the event of death. All of this can be very confusing. Let’s discuss some life insurance options to pay off your mortgage.

Did you know mortgage life insurance or mortgage protection life insurance differs from term life insurance? Generally mortgage life and mortgage protection life may not be offered through life insurance agents. It is usually offered through the bank or institution the mortgage is through. The face amount of the policy is equal to the loan amount and the loan period. The concept of the policies is the face amount reduces along with the mortgage and pays the lender directly at death. The insured would not elect a beneficiary. The cost of the coverage generally remains level during the policy period and will not vary based on the healthiness of the insured. People with marginal health may qualify and pay the same cost as the healthiest individuals. The qualification process is typically easier than fully underwritten life insurance through life insurance carriers.

Typically, term insurance or level term life insurance would provide a level face amount or death benefit with level premium payments ranging from 10 to 30 years. You would need to meet carrier qualifications and the healthier you are, generally, the lower the cost, versus having marginal health and paying higher costs. You have the ability to elect the beneficiary of choice, providing the election meets the carrier requirement of insurable interest to the insured. The beneficiary would have the option of paying off the mortgage or invest the proceeds and pay off the mortgage monthly. There are advantages and disadvantages of each of these products depending on your age, health, cost consciousness and philosophy.

About the author:  Ken Buccico holds a LUTC designation and has been in the life insurance business for 39 years. His wealth of experience empowers clients to make best possible decision regarding a life insurance policy. To explore the best life insurance option, contact Ken at 1-800-651-1953 or KBuccico@Pivot.com.