How Mortgage Life Insurance Works

Published: 22nd January 2009
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Mortgage life insurance is important for all owners of homes, condominiums, and townhouses. Mortgage insurance is life insurance that pays the balance of a mortgage if the mortgagor (insured person) dies.

Mortgage life insurance is usually in the form of decreasing term insurance, with the amount of life insurance decreasing as the outstanding mortgage loan decreases over the years.

If you're shopping for a new home, or already own a home, mortgage life insurance can provide you and your family with the protection they need to maintain their home, in case you pass away.

Mortgage protection insurance is not Private mortgage insurance, or PMI. Mortgage protection insurance is used to protect your family and your home. Private mortgage insurance is purchased to protect your lender.

With a mortgage life insurance policy, the death benefit proceeds are used to pay off the remaining balance of your mortgage. If your mortgage is for 30 years, then a 30 year term life insurance policy may be purchased to protect your mortgage.

Although mortgage protection insurance can be purchased with the idea of paying off your mortgage, many financial advisors may suggest that you consider your entire financial situation, and buy a life insurance policy that takes into account all of your financial needs for your family.

Mortgage life insurance is available in several different types of life insurance plans. Among the more common policies are mortgage protection insurance, decreasing term life insurance, and level term life insurance.

Decreasing term life insurance provides life insurance protection for up to 30 years. So, if you have a mortgage for 30 years, or less, this type of policy may provide coverage to insure you throughout the term of your mortgage.

Decreasing term insurance provides premiums that remain the same each year of the policy, while the amount of insurance decreases each year, in line with your outstanding mortgage.

Level term life insurance is available for 10, 15, 20 or 30 years of protection. So, if you have a 15, 20 or 30 year mortgage loan, this type of policy may provide protection throughout the term of your mortgage.

Level term life insurance provides premiums that stay the same each year, and the amount of life insurance protection is constant, remaining the same each year throughout the term of your policy.

Level term life insurance would not only provide funds to help pay off your mortgage, but there may be additional money left over, to help provide for living expenses or other necessities for your family.

It may be a good idea to compare prices, coverage, and plans for mortgage protection insurance, decreasing term insurance, and level term life insurance when deciding which plan may provide all the benefits you want for your family.

A 2003 study conducted by the Insurance Information Institute indicated that 97% of all term life insurance policies purchased in the U.S.A. were level term life insurance policies.

Keep in mind, if you were no longer there to provide for your family, they would not only need money to pay for the mortgage, but funds to pay for other living expenses, such as, clothing, education, savings, vacations, and all of the other items currently accounted for in your family budget.

The bottom line is mortgage life insurance coverage not only provides protection for your family, it helps them to continue their current lifestyle in the home they share with you.

To learn more about Mortgage Life Insurance and request your free quotes, Please visit Mortgage Life Insurance

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