Some Facts You Need to Know About Mortgage Life Insurance

Before you take on a mortgage life insurance policy, it is best that you know the details and facts related to the policy. This way, you know what to expect from your coverage. When also make an application, you will also have to look at your options, so it will be helpful to know some key facts regarding a mortgage life insurance product.

Repayment Mortgage or Interest Only Mortgage?

You will need a different kind of coverage for different kinds of mortgages.

• Repayment mortgage. If you have a repayment mortgage, your monthly payments go towards decreasing the loan, as well as the interest on the loan. The mortgage life insurance that should cover this should be one that decreases along with the loan. By the end of the loan period (when you will have paid off the loan), the insurance coverage will also cease.
• Interest Only mortgage. This kind of mortgage requires you to pay the whole principal at the end of the loan period. During the intervening years, you will only be paying the interest on the principal. For this type of mortgage, you will need a level term mortgage life insurance policy. This provides you coverage for the entire loan amount.

The advantage of getting a level term life policy is that you can refinance your mortgage, since the coverage remains level. On the other hand, the mortgage life insurance for a repayment mortgage costs less.

Single Life or Joint Life?

The advantage of a mortgage life insurance is that you have the option to cover just your life or include your spouse in the coverage. With a joint mortgage life insurance, the common choice is a first death plan. This means that the policy will pay when either you or your spouse pass away.

Additional Options

Aside from the basic life insurance cover, you can also opt for additional benefits:

• Terminal Illness Benefit.

  This will pay the remaining mortgage balance in the event that you become terminally ill within a specified time period. The period covered usually excludes the last 12 or 18 months of the term of the policy.

• Critical Illness Benefit.

  This will pay out if you are diagnosed with a critical illness that is covered in the policy. Please note that this is a different benefit than the terminal illness benefit. The list of covered illnesses for both will be different although there may be some overlaps.

• Guaranteed Premiums Benefit.

  This type of policy assures you that your premiums will be the same throughout the life of the policy. There may also be some variations to this – where the premiums are up for review for every specific time period. The company may set new premiums after the review.

• Waiver of Premium.

  This waives your monthly premiums in the event that you get disabled or critically ill. This may depend on the type of rider being added to the policy. It may be that all the premiums are waived or that payments for a limited number of months are waived.

Please note that for terminal illness or critical illness benefit, as well as the life insurance cover, there will only be one payment for the total claimable amount.

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Also feel free to visit our sister critical illness cover website.