Who needs mortgage life insurance?
Simply put, anyone who has a mortgage will need mortgage life insurance.
Why do people fail to buy life insurance to cover a mortgage?
Here are some of the reasons why:
- “I didn’t really think it was needed.”
- “It is highly unlikely that I will die within the coverage period so the cover is just a waste of time.”
- “I can’t afford to pay extra for the premiums.”
- “I’m not healthy enough to get life insurance.”
This insurance product is there to ensure that should you pass away, your family will not have to worry about paying the mortgage. Mortgage life insurance will kick in and pay the remaining mortgage.
Sadly, statistics show that about half of all mortgage holders have failed to secure their mortgage via life insurance coverage.
This is based on research by Sainsbury’s Finance and indicates the degree by which individuals of a certain age group don’t have mortgage life insurance cover to protect their mortgage.
But let us look a little more at those who will need mortgage life insurance more than the others:
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People who have insufficient life insurance cover.
There are people who usually find it hard to qualify for life insurance under normal circumstances. This may be because the person has a very risky job or is in poor health. When a person that bears high risks applies for a life insurance cover as an individual, the tendency would be that the insurance company will deny the application due to the nature of the risk presented by the applicant.
The advantage with getting mortgage life insurance is that those with high risks may get accepted, since most of these don’t require medical exams. It is necessary, however, that the applicant divulges his health condition at the time of the application. Any nondisclosure of your health condition, as well as other information pertinent to the application, will be examined when you need to make a claim, especially within the waiting period.
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People who cannot afford to lose the income of a family member.
If your household is in a precarious financial position, where the income of all the members is necessary to meet the monthly obligations and day-to-day needs of the family, then it is all the more important that you ensure that your mortgage is covered.
Research show that mortgage payments comprise some 25% of the family’s budget for essentials. If the family’s entire budget is highly dependent on the income of both spouses, the loss of the income of one spouse can have a tremendous impact on the family’s ability to keep up with the mortgage payments, let alone other basic needs such as food, education and transportation.
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Single parents and divorcees who have dependents.
Divorcees and single parents are especially vulnerable since they are usually relying on just one income – theirs. Divorcees may need to assume an existing mortgage under just their name. The sudden loss of that income will effectively cut off the ability to cover the monthly payments.
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Those who have increased their mortgage amount via a new mortgage or a major home renovation.
This usually means an increase in the amount of debt the household will have. This means additional cover is needed to cover the increase in debt.
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Those who have high premium ratings.
Life insurance is computed based on several factors (Take a look at the Costs of mortgage life insurance article for more information.) that contribute to one’s mortality rate – the probability that he will or will not survive the term. Those who are not denied life insurance coverage but may otherwise be charged with high premiums can get more affordable life insurance coverage through mortgage life insurance, as this is generally cheaper than other individual life insurance policies. Here, the premium will depend on the kind of life insurance cover (usually term life insurance), the amount of cover provided, as well as the physical condition and age of the borrower.
Mortgage life insurance may seem an unnecessary expense, but with today’s hard times, it will do good to protect your substantial investment on the house with this highly affordable life insurance product.
Latest update: 14.06.2013
Get your mortgage life insurance quote now, fill our form on the right.
Other sites: critical illness cover, lifeassurance.org.