How to Protect Your Mortgage with a Cheap Term Life Plan

How to Protect Your Mortgage
With a Cheap Term Life Plan

Did you know that if you die, your assets and debts transfer to your heirs? Did you know that when a married couple secures a home loan, borrowers share equal responsibility for the debt? In this type of situation, the lender does not collect from the estate of the deceased even if assets exist. The lender will obtain the loan balance from the remaining party even when not the estate heir. It is a complicated process which validates the need for a separate mortgage term life plan.

What is a Term Life plan?

In today’s market, Americans are most likely to buy term life insurance. This type of insurance plan provides coverage for a specific amount of time. The amount of years you select is the term in which your insurance carrier will pay a death benefit to your beneficiaries if death occurs.

When compared to other forms of insurance, term life is the most affordable way to secure protection. Most policies are level term life coverage plans which means you will pay the same monthly rate throughout the length of your stipulations.

How does it work?

Insurance companies will sell you a term policy that offers you many options. It includes the amount of the death benefit, the number of years you want coverage, and the price variable. Coverage varies, but policies start as low as ten years and go as high as thirty. Insurance enables buyers to get what they need, so the higher your months of coverage, the more premiums you will pay because of the risk that increases for carriers.
Coverage: $500,000
Sex: Male
Age: 35 Years
Term: 30 Years
Premium: $35/month

*Premium amount may be subject to change based on carrier’s underwriting.

Should I get mortgage coverage with my Term Life plan?

Let’s think about the reason to get life insurance. You want your family to have financial security in case of an unexpected loss, right? Now imagine if you have a mortgage that your death benefit must first pay. Would your family still be financially secure without cash assets if your entire payout covers your mortgage? This coverage is about smart thinking and planning.

Your home is undoubtedly the most expensive asset you own. Would your spouse be able to keep up mortgage payments? If you want to protect your loved ones from financial instability, a mortgage insurance policy is an affordable option that will preserve your dependent’s interests.

What is a mortgage Term Life policy?

This type of term life policy benefits homeowners as it prevents loss of assets because of the inability to pay after death occurs since the plan will pay the balance off in full. The terms are typically for fifteen or thirty years. Coverage usually has age and amount restrictions.

Most companies offer affordable rates as low as two to three hundred annually for a thirty-year term that provides mortgage coverage of one hundred thousand. Even a moderate amount would offset the chance of a loss occurring since it would pay your mortgage payments for some time.

Just like with insurance, you may outlive your policy. Critics tend to look at this as wasteful spending. It is much like protecting your home from theft, fire, or damage. Like any other policy for death or assets, you buy the protection in case you need it with the hopes that you never will.

Critics also argue that a regular term life insurance is just as adequate. While that might be true, do you want to leave your spouse with debts? If you have a $100,000 policy and owe $75,000 on your mortgage, how long with the remaining death benefit last with your current responsibilities?

It is an excellent way to look at the value of mortgage term life policies in that each person must weigh their cost of living against the loss of the financial provider. For some homeowners, it is another level of protection that will protect property assets because of the scope of the policy.

What are the different types of mortgage Term Life policies?

The most affordable mortgage insurance is a level premium policy which enables you to purchase coverage for twenty, twenty-five, or thirty-year terms. It sets aside non-negotiable funding for a mortgage and guarantees the agreement will not increase or decrease over time.

There is also a general return-of-premium term life policy that returns your premiums two decades after expiration should you outlive your terms. This type of plan will enable you to use the return for any expense unlike a mortgage policy which applies to homeowners only.

Is a mortgage Term Life the same as Private Mortgage Insurance (PMI)?

A private mortgage insurance policy protects the lender if you default on your loan. A mortgage term life policy protects you and your loved ones from losing the property so that no default ever occurs. This type of coverage sets aside funding specifically for your mortgage if needed.

To decide on buying this type of policy, you can ask yourself a few questions:

1. What are your debts?
2. Do your debts equal more than your mortgage balance?
3. Will you benefit from both term life coverage and a mortgage policy?

For people with health issues that disqualify you for regular life insurance coverage, a mortgage policy is an ideal way to protect assets as you do not have to have a medical exam. Everyone qualifies regardless of health conditions. With your regular premiums, you will face increases. With a mortgage policy, your fixed rate guarantees you have affordable asset protection.

Leave a comment