Mortgage Life Insurance vs. Term Insurance

If you are in the process of buying a home, you might be hearing about mortgage life insurance. Before jumping on board, it is important to understand what it is and what your other options are too. It is important to have some type of coverage, but you should weigh your options before making a final decision.

What is Mortgage Life Insurance?

The purpose of mortgage life insurance is to pay off your house in the case that you would die while there is still a balance. This offers protection for your family. When you pass away, your mortgage may be a large financial burden on your family. Mortgage life insurance can help to cover those expenses so your family can handle everything else at the time of your death.

What is Term Insurance?

Term insurance is a type of life insurance. With term insurance, the policy is active for a set term that you choose when getting the policy. Common term lengths include 10 years, 20 years, or 30 years. If you die while the policy is active, the death benefit is paid out. If you outlive the policy, you do not receive anything. There is no cash value associated with the policy. This is an excellent option to protect your family during those critical years when mortgage is at its highest, and the you still have people depending on you for income.

Mortgage Life Insurance vs. Term Insurance

What you choose should depend on your needs. In most cases, term insurance does the trick. It offers many advantages over mortgage insurance, including:

You will save money

With most companies, term life insurance is more affordable than mortgage life insurance.

Your family has more flexibility

With a mortgage life insurance policy, the death benefit must be used for your mortgage. With term life insurance, your family can use the payout for whatever they need to cover. Perhaps medical bills are more urgent than paying off your home is.

Term insurance can last longer than mortgage life insurance

Mortgage life insurance is meant to last for the duration of your loan. With term life insurance, the choice is yours. Depending on how long you want protection for, term life insurance can be a wise decision. You can choose your benefit amount. With mortgage life insurance, the purpose is to pay off your mortgage. The policy matches your loan. With term life, you can choose the amount needed so that your family can pay for all of your expenses if you pass away while the policy is active.

Mortgage life insurance can be a good option of you are strapped for time and may be you need it as a checklist item to complete the closing on your home, otherwise, you’re better off taking the time to shop around and see if there are better term life insurance options available to you.

According to Over50LifeInsure, term life insurance is the best option when it comes to protecting your spouse. This is because it can cover both the mortgage and help replace your income. On top of that, you’re able to get a much better rate due to access to all the life insurance companies on the market serving that product.

There is one main situation where you should consider getting mortgage life insurance. If you are unable to be insured, mortgage life insurance can be a good choice. Your family will still be able to pay for the cost of the loan if needed. Certain health conditions will prevent you from getting life insurance.

Closing

When you buy a home, it is a good chance for you to evaluate your insurance policies as a whole. Be sure to consider the needs of yourself and your family. Find out how much coverage you need before getting a policy. This will help you to make the best decision for you and your loved ones. What you should do is try and get a professional that can help you shop around with all the companies and help you navigate through the insurance terrain. Brokers are compensated by life insurance companies so it won’t cost you any extra to work with one. Try to find one savvy with mortgage insurance and help you decide what product best fits your needs.