Mortgage insurance is the term used for affordable life insurance that typically covers your mortgage. In other words, if something were to happen to you, your life insurance benefit could be used to pay off your home in full. This eliminates the heavy burden of making mortgage payments, or in worse cases, losing the home entirely.
Understanding What Mortgage Life Insurance Is
When you buy a new house, one of the first things you see in the mail are sales letters trying to sell you life insurance to protect your mortgage in the event you die.
Most of the mortgage protection life insurance on the market is a product called “decreasing term”, where the payout becomes lower over time while your monthly premiums stay the same. Many of these policies sold are not only expensive but they rarely ever pay out.
The best option when looking for life insurance to protect your new home is either an Accidental Death (the cheapest) policy or a term life insurance policy (the best coverage).
Protecting your family with a mortgage life insurance policy helps ensure that your family never has to worry about having a place to live in the event something happens to prevent you from being able to provide for their needs.
$50,000 – $500,000
Since death by accident is more common, having an AD&D policy for the entire amount of the mortgage on your home will help your family pay off what is owed on the loan in the event of death by accident. Protecting your family’s home and future shouldn’t have to be expensive. Learn more
Types Of Mortgage Life Insurance Policies
There are three main types of life insurance policies that people use to protect their new home purchase.
Decreasing Term Life Insurance:
This is the most common mortgage protection life insurance product and one of the worst life insurance products on the market. With this kind of product, the amount you pay each month stays the same while the face amount of coverage decreases over time. When buying a new house, these are the types of policies you will see being advertised to you.
The easiest way to protect your family and your new home is with a term life insurance policy that doesn’t require a medical exam. These type of policies often have a level benefit (the amount paid out stays the same for the life of the policy) and level premium (the price you pay each month stays the same), making them a better value than a decreasing term policy.
If you are looking for the cheapest solution for mortgage life insurance, then an AD&D policy will give you the protection you need at the lowest cost possible. While an Accidental Death policy won’t cover you for death by natural causes, these types of policies will often pay double the face value if your death was due to an accident as a commercial passenger.
Is Mortgage Life Insurance Important?
Yes. Housing is the most expensive part of any household budget and having a plan to protect your family’s home is vital. Obtaining a separate life insurance policy to help provide that protection is key.
In many cases, having a separate policy to cover your home allows you the ability to stop paying for the coverage without the need to change any other existing life insurance coverage you may have.
Mortgage life insurance helps makes sure that if something were to happen to you, your family’s housing situation is no longer a question.
How Does Mortgage Life Insurance Work?
As a stand-alone policy to your standard life insurance coverage, mortgage protection insurance through True Blue provides protection for the length of your mortgage with a “level benefit” where the death benefit does not change. Not only that, the premiums are “level” and stay the same through the life of your policy.
Better yet, many of the policies we offer do not require a medical exam, making the underwriting timeline be much quicker in almost every case. This helps you get the coverage you need in the least amount of time possible.
As you pay down your mortgage, you can opt to cancel the policy when the amount owed no longer has an impact on the financial future of your family in the event something were to happen with you. If you wanted to keep it, you could do so or convert it to a whole life policy with no underwriting restrictions.
Is Mortgage Protection Insurance Expensive?
For example, a 40-year-old non-smoking male in California can get $250,000 in AD&D coverage for under $20 per month.
For $250,000 in term life insurance, the price starts around $32 per month.
Simply put, mortgage life insurance is a minor cost for the comfort of knowing that your family and your home is safe, even in the worst situations possible.
$25,000 – $5,000,000
While most mortgage protection life insurance plans out there are what is called “decreasing term” (where the benefit gets smaller, but the premium remains the same), all of our term life benefits and premiums stay the same through the life of the policy. Learn more
How Much Mortgage Insurance Do I Need?
Whatever your current loan amount is rounded to the nearest $50,000 increment.
Because this is a stand-alone policy dedicated to covering your mortgage in the event of your death, you will want it to be pretty close to what is currently owed plus a little more for two reasons.
One reason is to insure the mortgage in case you decided to get a small home equity line of credit for upgrades, repairs, bill consolidation, or whatever issue comes up. In most cases, people will forget to increase their insurance coverage at this time and place their loved ones in even more financial risk if something were to happen.
Another reason is that of “breakpoints” in life insurance which allow for discounts in price at certain coverage levels. Some companies may charge more for $205,000 in coverage vs. $250,000 because the latter amount is often one of the “breakpoints”. It is advised to get quotes for both the actual owed amount and the next closest $50,000 increment to which makes the most sense for your budget.
How Do You Purchase Mortgage Protection Insurance?
Talk to an independent life insurance agent, like True Blue.
Being able to shop over 20 companies helps you find the best insurance policy at the best price. Since independent agents represent multiple life insurance companies, they have a focus on getting you the best coverage when compared to other agents who represent only one company.
True Blue is one of the only insurance agencies that allow you to see quotes online without requiring you to provide contact information upfront. When you see what the prices are, you can submit an application request and one of our agents will contact you to finish up the required information with no pushy sales gimmicks.
How Do I Cancel Mortgage Life Insurance?
To cancel your mortgage protection insurance, all you have to do is call the company to cancel.
Since these policies are life insurance policies that do not build cash value, canceling coverage is easy and quick. When you no longer need the protection, just let the company know and they will close it out for you.