{"id":6120,"date":"2024-11-15T08:09:42","date_gmt":"2024-11-15T13:09:42","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=6120"},"modified":"2024-11-15T08:09:44","modified_gmt":"2024-11-15T13:09:44","slug":"mortgage-life-insurance-what-is-it-who-needs-it","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/mortgage-life-insurance-what-is-it-who-needs-it\/","title":{"rendered":"Mortgage Life Insurance: What Is It? Who Needs It?"},"content":{"rendered":"\n
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As soon as you close on your new home and the deed is in your name, expect to find a whole lot of marketing materials in your mailbox. Some of these items will be from insurers.<\/p>\n\n\n\n

You might get offers for mortgage life insurance<\/em> (a.k.a mortgage protection insurance<\/em>) and wonder if it\u2019s worth looking into.<\/p>\n\n\n\n

Mortgage life insurance is designed to repay your mortgage if you die during the loan term. So, if you should die before paying off your mortgage in full, this insurance pays off the balance so your loved ones won\u2019t have to. But do you need this policy? Let\u2019s take a look at what it is, and who really needs it.<\/p>\n\n\n\n\n\n\n\n

What Is Mortgage Protection Insurance?<\/h2>\n\n\n\n

Mortgage protection life insurance assures a homeowner that other people will not have to step up and deal with the mortgage if the borrower dies unexpectedly, or becomes unable to work. If something like that should happen, the policy pays off the mortgage debt.<\/p>\n\n\n\n

So, a policy of this type makes sure that a home buyer (and the lender) have arranged for the home\u2019s mortgage to be faithfully repaid \u2014 even when the borrower is no longer in the picture. The borrower\u2019s survivors will still need to handle the property taxes and homeowner\u2019s policy \u2014 but the mortgage will be taken care of.<\/p>\n\n\n\n

Mortgage protection insurance is sometimes called MPI. Don\u2019t mix it up with <\/strong><\/em>private mortgage insurance \u2014 PMI<\/em><\/strong><\/a>. Home buyers have to pay premiums for PMI if their mortgage doesn\u2019t cover at least 20% of the home\u2019s price. PMI protects the lender from possible default. <\/strong><\/em><\/p>\n\n\n\n

The insurer charges regular premiums to keep mortgage protection insurance in place. And the borrower sends these payments to the mortgage company.<\/p>\n\n\n\n

Most such policies cover the whole balance left on the mortgage, as long as the loan exists.<\/p>\n\n\n\n

Does Mortgage Life Insurance Cover Real Needs? For Whom?<\/h2>\n\n\n\n

If you don\u2019t plan to stay in your home for a span of years, or if you have no financial dependents, you likely do not need this insurance. Deed holders who enjoy relatively good health may be able to pick up regular life insurance at a better cost.<\/p>\n\n\n\n

But a mortgage life insurance policy could<\/em> make sense for some people with medical issues.  <\/p>\n\n\n\n

Say you\u2019re having eligibility problems and haven\u2019t been able to buy a regular life insurance policy. Mortgage life insurance could fill in that gap.<\/p>\n\n\n\n

Most any borrower should be eligible for mortgage life insurance. And it\u2019s effective as soon as there\u2019s a policy in place.<\/p>\n\n\n\n

There is usually no medical exam involved, although the borrower does need to submit personal health history information.<\/p>\n\n\n\n

The coverage that comes with a mortgage life insurance policy could also be attractive to someone who has an employment-based life insurance plan that could be lost due to likely job changes ahead.<\/p>\n\n\n\n

Buying a home with a VA loan? The Department of Veterans Affairs has its own brand of coverage: <\/strong><\/em>Veterans’ Mortgage Life Insurance<\/em><\/strong><\/a>. With this type of policy, a borrower pays the premiums to the VA.<\/strong><\/em><\/p>\n\n\n\n

A mortgage life insurance policy could also make sense for deed holders with young kids. It could be good for a homeowner whose spouse earns too little to cover the mortgage bills alone.<\/p>\n\n\n\n

Can\u2019t a Life Insurance Policy Cover the Same Need?<\/h2>\n\n\n\n
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Good point! Yes, you might be able to get the protection you need with regular life insurance. You can always call your current insurance broker, walk through some policy comparisons, and ask for personalized guidance.<\/p>\n\n\n\n

In fact, with regular life insurance, the death benefit is more expansive. You could get a life insurance policy that\u2019s worth at least as much as your mortgage. Some people buy life insurance worth ten times their annual salary.<\/p>\n\n\n\n

If you should die during the term of the policy, the named beneficiaries would get the value of the life insurance policy. (Not the lender.)<\/p>\n\n\n\n

The beneficiaries would be free to use that payout to handle any debt secured to the family home. But the beneficiaries named on a regular life insurance policy can also <\/em>use the funds in other ways, as they see fit. General life insurance offers survivors that flexibility. Beneficiaries to a general life insurance policy may choose to:<\/p>\n\n\n\n