Mortgage Life Insurance: Don’t be caught without it
Many people don’t consider mortgage life insurance to be an important part of their financial plan, but it’s vital that they do. Life insurance provides financial protection in the event of the death of an insured person, and mortgage life insurance ensures that your mortgage payments will be made if you die.
Without it, your loved ones could have to sell their home at less than market value or lose thousands of dollars in accrued equity just to pay off your outstanding mortgage balance. With mortgage life insurance, however, your family can rest easy knowing that they won’t lose their home if something happens to you.
What you need to know about life insurance
Mortgage life insurance is designed to pay off your mortgage and other loans if you die. It’s a critical aspect of any personal finance plan, but how much do you need? The short answer is that everyone needs at least some life insurance coverage; even if your family will have no trouble paying off your debts and/or living expenses, chances are you still want to leave them with some financial breathing room.
How much coverage do you need? A general rule of thumb is to purchase enough coverage so that when you pass away (and assuming nothing else changes), your family could continue on with their lifestyle for seven years or so. If they receive an inheritance or win a lawsuit settlement down the road, they can supplement what’s left over.
Why you need life insurance
Whether you’re purchasing a new home or you already have one, mortgage life insurance is an affordable coverage to make sure your finances stay protected. Keep reading for more information on how mortgage life insurance works and how to get started on applying for a policy today.
Where to get life insurance if you have a mortgage
A financial helper
What else can life insurance help with?
How to find the right policy
Getting the right price
How much coverage do I need?
Types of Policies Available
You have a lot of options when it comes to choosing life insurance. One option is permanent life insurance, which stays in effect as long as you continue to pay premiums (and until your death). If you have kids or other dependents that need your income, then term life insurance might make more sense. The policies are guaranteed renewable, meaning you can renew them if interest rates drop or financial needs change.
It’s important to check with a lender when considering mortgage life insurance; many lenders require certain types of coverage before they’ll agree to finance a home loan. Your financial professional can walk you through these requirements and help figure out which type of policy makes sense for your situation. Some borrowers opt for additional coverage beyond what their lender requires, particularly those who want to provide some level of security for their family should something happen to them.
The good news is that there are plenty of options available and you don’t have to buy one specific kind—or even any kind at all—to qualify for a mortgage. Speak with your broker about how much coverage you might need and what kinds would fit best into your budget.
He or she will be able to help you decide on a plan based on several factors including current finances, future plans, and personal circumstances.