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Mortgage Life Insurance

May 29, 2008  |  Difficulty: Easy

Path to mortage
The life insurance that you take out on your mortgage is similar to any other life insurance policy that you can have. Basically, the purpose of mortgage life insurance is to pay off the remaining principal balance on the mortgage if death occurs.

Mortgage life insurance is more costly than regular life insurance, but it can be lifesaving. Take this story as an example. Nicolas worked hard all of his life, and recently started to have chest pain. Ignoring the pain as a sign of stress, he never thought much about it. One night, tragedy struck and Nicolas’ family no longer had his breadwinning salary to fall back on. Thanks to the mortgage life insurance, Nicolas’ young family had one less worry to think about. The house was secured.

In the case stated above, mortgage life insurance was a complete benefit. But in other cases, most feel that this type of insurance is a money pit. The insurance is expensive, and there is a major downside. As the principal balance on your mortgage decreased due to your regular payment, you still pay the same high insurance premium balance.

With that said, most will agree that some life insurance is better than not being covered at all. Most mortgage lenders don’t ask you take medical examinations to receive a mortgage insurance policy. This is a plus because most outside life insurance policies involve physicals and tons of medical paperwork.

To save money, though, it may be wise to get a separate life insurance policy that costs a lot less than the mortgage life insurance your lender provides. Especially if the outside life insurance policy is weighty enough to cover the remaining balance of your mortgage and other important expenses.

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