Is Mortgage Term Life Insurance a Good Idea?

December 14, 2016

Mortgage loan companies usually offer their clients the option to buy mortgage decreasing term life insurance which guarantees that your mortgage will be paid off in the event of your premature death.

Although the idea behind it sounds good, purchasing mortgage term life insurance is usually not recommended, unless you are in extremely poor health and cannot qualify for life insurance coverage elsewhere. 

Who will benefit from mortgage term life insurance?

Mortgage term life insurance can be the only chance of obtaining coverage for people who are not eligible to buy individual life insurance due to poor health, obesity, smoking habits, dangerous occupation, etc.

Purchasing a mortgage term life policy guarantees that the family of the insured will be financially secure to meet all the outstanding debts in the event of insured's death. And the good news for all those who cannot otherwise qualify for regular life insurance is that they would not be asked to provide evidence of insurability.

These plans offered through your lender are usually guaranteed approval, which means higher rates than buying your own individual term life insurance policy which you could name your family as beneficiary.

Arguments against mortgage term life insurance

You should only choose mortgage term life insurance if you cannot meet the requirements for standard life insurance. Remember that the healthier and the younger you are, the lower the term life premiums will be. Since mortgage term life insurance does not ask you for evidence of your health condition, premiums are typically higher than if you were to buy your own individual term life insurance coverage privately, rather than through your lender.

With mortgage term life insurance, the mortgage company, and not your family, is the beneficiary. Thus, your family does not have a choice of deciding what to spend the death benefit on. When you purchase a mortgage policy, you make a commitment that the face value will go towards the mortgage in the event of your death.

It is advisable to choose a regular term life insurance policy instead, as it will give your family the freedom to decide what to spend the proceeds on.


Mortgage Term Life Insurance Simplified Issue?

November 30, 2015
Is there any simplified issue mortgage term life insurance available?

Yes, there are simplified issue term life plans that offer coverage up to 30 years to provide protection to help pay off your home mortgage loan.

Most mortgage term life policies offer coverage for a period of 10, 15, 20 or 30 years. So, if you have a 15 or 30 year mortgage, a simplified issue term life policy can help you accomplish your goal.

For example, one carrier offers up to $350,000 of simplified issue life insurance f...
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Is Life Insurance Needed For A Mortgage?

September 28, 2013

Life insurance is usually not required when getting a mortgage loan on your home unless the down payment is very low, for example, 5% or less.

Then, the borrower is required to buy a type of insurance called "PMI", or Private Mortgage Insurance. This insurance coverage would pay the lender what is owed to them from the outstanding unpaid balance on the mortgage loan in the event of the mortgage borrower's death.

However, many people do use regular term life insurance to prote...

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Why Do I Need Life Insurance With A Mortgage?

September 23, 2013

You may or may not need life insurance with a mortgage.

Your lender may require you to carry mortgage insurance if you are making a low down payment on your home. Mortgage insurance names the lender as beneficiary and the death benefit goes to the lender to pay off your mortgage loan upon your death.

However, you may want to consider mortgage term life insurance if you own a home with a mortgage. Mortgage term life allows you to name your spouse, or anyone you choose, to be...

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Mortgage Insurance No Physical Exam

September 4, 2012
Are you looking for mortgage life insurance but you don't want the hassles or delays of taking a physical?

If so, you now have another option, there is mortgage life insurance available with no health exam needed. However, there are some health questions for you to answer when you apply for your policy.

But, if you qualify, you may be able to purchase up to $500,000 of mortgage term life insurance without having to take any physical examination. And, if approved, you may be able to start your m...
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Mortgage Life Insurance

August 11, 2012
What is mortgage life insurance?

Mortgage life insurance is a type of term life insurance that provides money for your surviving family members to pay off your home mortgage loan in case you die.

Mortgage term life insurance can last for a period of 15, 20, 25, or 30 years. You choose a term for your life insurance to provide coverage for a period of time that matches your mortgage loan.

If you die during the term of your mortgage life insurance policy your spouse (beneficiary) will receive the ...
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