Life Insurance

Drawbacks and Advantages of Mortgage Life Insurance

The majority of people are right to thing that one should take special care for things of great importance and value, primarily those that put us in a lot of debt, such as our home mortgage. Usually a regular family is unable to deal with their mortgage payments should the breadwinner pass away. As a result, mortgage life insurance is a really sensible solution. The idea is worth considering, but so are its drawbacks.

Mortgage life insurance is a decreasing term policy. What this means is that the amount of your insurance is reduced yearly along with the mortgage you own. While the premiums are still the same the real cost of your insurance rises as the insurance decreases. It is possible to deal with it by means of a level term policy. You can buy level term for 10, 15, 20, 25, or 30 year terms. There is a strong competition among insuring companies and the increasing life expectancy have made level term as affordable as decreasing term. If a death occurs in the later period of your mortgage there would funds remaining for other expenses after paying off the mortgage.

Mortgage life automatically names the lender as the beneficiary. It may not be in the best financial interest of the beneficiary to have the mortgage paid off. What if, for instance, the insurance proceeds could be invested in a way which would provide more interest than what is currently being paid out in mortgage interest? What if someone faces more current financial issues than paying off the mortgage? A level term policy with a designated beneficiary allows the customer to have control of the death benefits and makes it possible to decide whether or not to pay off the mortgage.

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