Is mortgage life insurance necessary?
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by: ChrisClare
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You may be thinking to yourself that this does not apply to you. You already have life insurance, so why get mortgage life insurance?
Well, for starters, you will be providing for your family a way of paying off the remainder of your mortgage should you die before you have paid the whole amount yourself. If your mortgage of choice is a repayment mortgage, then the amount of coverage you need to allow for will lessen each year as the debt decreases. This means that you are saving each year as you only pay for the amount of coverage necessary for the remaining balance.
You can choose to buy your mortgage policy on either a joint or single life basis. When you initially start up the policy, you will be asked to specify the exact length of time it will be required to run, known as the term of the policy, as well as the total amount of coverage required at the beginning of the policy. It is also highly advisable to include critical illness cover as a factor of your policy, which will cost you a little bit more again.
The reason why the advantages outweigh the financial cost is simple but very important. The company that you have obtained the policy from will pay out to the principal insured either on death or the contraction and diagnosis of any one of a number of specified critical illnesses, depending on which occurs first.
If the value of the policy is paid out as a benefit, the mortgage policy is then terminated. If, however, you manage to live until your whole mortgage is paid off and have not had to cash in your mortgage life insurance policy, the policy ends without anything being paid out.
The policy has no cash value at the end of its term. This also means that if you select a policy good for the entire term of the mortgage, the loan has been paid off as well so you do not need that coverage any longer. If you are in the midst of replacing a policy which is currently in force, make sure that you do not cancel your current mortgage life insurance policy until you have concrete proof that the new policy is in force. This seems like a pretty simple thought, but should you cancel your current policy and, for whatever reason not be approved for the new policy, you might find yourself uninsured and uninsurable.
Your policy can run anywhere from one to forty years. You may choose to run the policy for the same length of time as the mortgage itself. It is really down to your own financial restrictions. You can have full coverage for the whole term or for just a part of it, it is entirely up to your own personal circumstances.
It is worthwhile noting that the majority of mortgage life insurance providers should allow you to increase the coverage of your policy if your circumstances dictate it necessary. Say for example you have to take out a loan for home improvements. This extra money will need to be covered. On the other hand, it may be that you bought your home as a single person but have since got married. There may be scope to re-evaluate the policy you have to tie in with your new situation.
By searching on the internet you will definitely find several sites which can give you good, well written advice on how to go about finding the right policy to suit your situation and requirements.
To summarise, it is imperative that you seek the advice and expertise of a qualified insurance broker when seeking to obtain a mortgage life insurance policy. He will be able to show the advantages entailed in critical illness cover and whether it's for you. You will have to decide whether to cover the whole value of the mortgage and also whether the policy will run for the full term of the mortgage, if not longer. Happy hunting.
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