If you are buying a home, chances are someone will suggest you buy life insurance-usually mortgage life insurance or term life insurance. Doesn't really matter which, because life insurance is life insurance, right? No way.
Mortgage life insurance and term life insurance: Let's talk price
Mortgage life insurance rates-- With mortgage life insurance you pay a premium rate per $1,000 of your mortgage balance. This premium rate is the same for everyone in your age bracket in part because fewer, if any, health questions are asked resulting in relaxed medical underwriting. Depending on a person's health, this will benefit some people more than others.
Mortgage life insurance pays off your mortgage if one of the people listed on the loan dies before it's paid. Because with each payment your mortgage decreases, so too will your life insurance coverage. Your payments on the other hand will not. This means that with each payment made to your mortgage, the cost for your mortgage insurance gets more expensive.
Term life insurance rates-- Term life insurance rates are usually more affordable than mortgage life insurance because some medical questions are asked. While this may seem odd, the fact is, because the insurer knows your health status they can offer you the best available rate-they don't have to take into consideration "the good, the bad and the ugly" of the rest of the group. You pay your premiums based on your current status only, no one else's.
With term life insurance you can cover more than just your mortgage. You choose the amount of coverage, so if you want to have enough to pay off the mortgage, other debts (like car loans or credit cards), or for the regular living expenses of the surviving family members-you can get it. What's more, the coverage you get and the premiums you pay are set for the length of the term you've chosen, often 10 or 20 years.
Mortgage life insurance and term life insurance: Policy points to ponder
| Mortgage life insurance | Term life insurance |
| The amount of coverage is determined by how much you owe on the mortgage. | You determine how much coverage you want. |
| The beneficiary is the mortgage lender. | You choose the beneficiary. |
| If you move your mortgage to another lender because of a better interest rate, you will have to qualify for a new policy. | So long as you keep the policy active, your coverage will follow you regardless of who you have your mortgage through. |
| If you sell your home for another, you'll have to get and qualify for a new policy. | So long as you keep the policy active, your coverage will follow you regardless of how often you move. |
| Once your mortgage is paid, you no longer have coverage. | Once your mortgage is paid, you can keep your policy for as long as you like. |
There's more to your family then the family home
While mortgage life insurance may be convenient - you can get it from your mortgage lender - it only pays what's left of your mortgage. What's more, you often pay more than a regular term life insurance policy for this convenience. But what about the rest? Term life insurance offers coverage that can be used for anything, including funeral expenses, paying down a mortgage, car loan and credit cards, or to offset the loss of income into the family finances.
When purchasing your new home, take the time to shop around for insurance. Compare the cost of a term life insurance policy to a mortgage insurance policy. Chances are you'll find a term life policy will have lower yearly premiums and offer more coverage and flexibility than a mortgage insurance policy.
Compare term life insurance quotes today.
