Owning a home is one of the proudest moments of anyone. It means having somewhere you can call your own and raise your family. Financially, it’s also a huge asset that needs to be protected especially if you acquired it using a mortgage.
Mortgage protection insurance is a form of life insurance that clears any outstanding balance if you pass away before paying off a mortgage. Usually, your bank could sell that property or ask your spouse or co-signer to shoulder the financial responsibility of the mortgage.
If you want to avoid this kind of situation, we highly recommend you take out a mortgage life insurance cover. Below are five reasons we think it’s useful.
Pays off your mortgage balance upon death
The main benefit of taking out a mortgage life insurance cover is to help pay off any outstanding mortgage balance you may have left behind upon your death. If your family has no other source of income other than your salary, it can help lift the burden off them. Most importantly, the policy ensures that they do not lose their vital asset due to non-payment.
You can choose from multiple insurance options
As we mentioned earlier, mortgage protection is a form of life insurance. With this, there are two types of policies to choose from namely, level term and decreasing term insurance.
Below is how each works:
Decreasing term life insurance, which is the most common, pays the reducing balance on mortgage repayment. The assured sum decreases as you approach the end of your mortgage repayment period. On the other hand, the level term mortgage protection is best suited for cases where the mortgage is interest-only.
In both cases, the insurance provider protects your beneficiaries against evictions, which would otherwise occur due to a pending house loan. With this, you save your family from the emotional turmoil that losing a home can potentially bring.
Provides funds to meet other household costs
Where the insurance offers death benefits in the form of lump sum cash as in the case of a level term cover, your family can take care of other household expenses aside from the mortgage.
As with any home, there are recurrent bills that need taking care of including living costs and debts. In your absence, these can be burdensome on those who depend on you especially if you were the only breadwinner.
Life insurance makes mortgage repayment affordable
Mortgage protection that stems from a decreasing term life insurance policy is a cost-effective technique of repaying the mortgage. As you approach the end of your repayment period, the amount that you pay as a premium also decreases.
Although the assured amount decreases with time as well, it is a win-win situation. If you pass away, your insurance provider takes care of the financial burden of mortgage repayment. And if you outlive your plan, you clear the loan yourself. Either way, your family is guaranteed to have a permanent home at the end of it all.
When choosing a policy, we recommend you go with one that’s within your budget. You can hire an insurance broker to search the market and find you a plan you can afford even with your other household expenses.
Mortgage life insurance supports both single and joint policies
As with most life insurance forms, you are allowed to choose how to pay your premiums. For starters, you can list your partner as a second financier if both of you are working with the joint policy. In case you pass away, your partner can continue to meet the insurance cost. With this, your loved ones get a suitable cover that takes care of important financial burdens including a mortgage.
On the other hand, two single policies can pay out separately in the event you and your partner pass away. So, one partner can choose to insure against mortgage while the other against other aspects of your life.
So there you have it – everything you’d like to know about taking out a mortgage protection cover and the benefits of having it. If you have any further questions or need clarification on anything above, please do not hesitate to ask us in the comments below.