If you get a conventional loan and make a down payment of less than 20 percent of the home price, you are required to purchase private mortgage insurance (PMI). As the name implies, mortgage life insurance, or mortgage protection insurance, is there to repay your mortgage in the event you die or become unable to work. I have not seen anyone refer to age limit. Anita, if you can continue making your mortgage payments then nothing happens. A cheap premium may indicate limited cover. Mortgage life insurance is a type of life insurance policy that helps your spouse and/or dependants cover the mortgage payments if you die before you have paid it off in full. Mortgage life insurance is coverage that you can purchase as a mortgage borrower. This is an interesting discussion to me because I am considering buying mortgage insurance protection on a second home. Mortgage life insurance premiums are a fixed rate, but the payout is generally fixed to your mortgage principle*. Mortgage Life Insurance functions differently from life insurance in that it utilizes a system of declining payouts. Most important of those factors is the fact you can get a comparable term life insurance policy which will cover the cost of your mortgage and provide a cash benefit for your family – and all for around the same price or even less in most cases. Before we go any further, let’s discuss both the advantages and disadvantages which come with buying mortgage life insurance. For more information, please see our Advertising Policy. Also the house is only in my name. In this respect, paying your house off early exacts a penalty which could cost your family money. More often than not, folks are better getting a term policy on the outside market so long as they are insurable. Mortgage life insurance is also called decreasing-term life insurance.It is designed to clear the outstanding home loan if you die within the term of your mortgage. You know exactly how much will be paid out in the … If they want to use the funds to pay off your mortgage, they can certainly do so. Here is a helpful article: How Much Life Insurance Should You Buy?. Mortgage life insurance rates change from year to year. Each person should review their options and compare them before they make their decision. A traditional term life insurance policy gives you better control over how to use your life insurance settlement. For many buyers, the mortgage life insurance payout amount declines over time because it’s tied to the mortgage balance which will decrease as the homeowner pays off the loan, reaching zero when the mortgage is paid off. We don't sell your personal information, in fact you can use our site without giving it to us. Mortgage life insurance, also known as mortgage protection insurance, is a type of term life insurance that pays off your mortgage if you die prematurely. All rights reserved. The equity in my home is more than the amount owed and I want to make sure it is protected. Enter you name and email address to join our mailing list. Renee, from my understanding, mortgage life insurance needs to be purchased when you obtain your mortgage. Thus, it can be a valuable insurance policy option for any homeowner with serious preexisting medical conditions which would prevent them from buying a traditional life insurance policy. This form of cover comes with some of the cheaper premiums, but you should only take it out if you have a repayment mortgage which pays off capital as well as interest. People get suckered into these policies without understanding them, especially the decreasing term portion. Mortgage life insurance appeals most to people who have an overriding concern about making sure their home loan will be repaid if they die, he notes. Mortgage life insurance is supposed to protect the borrower's ability to repay the mortgage for the lifetime of the mortgage. We also have another house we bought after we were married, (my name only), that is paid off. Your lender is the beneficiary, which means the proceeds of your policy go directly to them when you pass away. Some companies will refuse to cover some individuals based on certain conditions. Mortgage insurance or mortgage protection: Which offers more flexibility? If your 60+ it gives one pause. The payout (the lump sum paid in the event of your death) is tied to your outstanding mortgage amount. If paying off the family mortgage is a priority, you can buy a term policy big enough to pay off your home and provide a cash benefit to your family. The quote is free and there is no obligation. Mortgage life insurance works by buying the policy for a specific period of time – or ‘the term’. That said, there are actually several reasons why people would want mortgage life insurance. Your family will thank you for it! 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