How to get life insurance and protect your mortgage is something that should be taught in every high school across the country. Why? Because home ownership is still a major theme of the American dream. And people typically cannot finalize a mortgage until they have a life insurance policy in place.
This makes sense. If a bank is going to loan you $100,000 or $1,000,000 or $10 million to buy a house or commercial property, they need to make sure they will get paid even if your time comes prematurely. Wouldn’t you stipulate this if you were the lender?
Since most schools do not teach students how the world of finance works, here are some tips to get you started learning about how to get life insurance and protect your mortgage.
How to Get Life Insurance and Protect Your Mortgage: Why Do It?
Mortgage life insurance vs private mortgage insurance.
Mortgage life insurance is used specifically to protect the repayment of a mortgage. It provides money to the borrower's beneficiary. This is in contrast to private mortgage insurance, which provides money to the lender against the risk of default by the borrower.
Protecting your loved ones.
With mortgage life insurance, the insured can be confident loved ones would not have to consider selling the house and downsizing.
Portability is key.
Mortgage life insurance is portable. If you move your mortgage to another lender, you keep your policy. You do not have to reapply and submit new evidence of insurability
How to Get Life Insurance and Protect Your Mortgage: Product Choices
Using term insurance.
Term life insurance is frequently used for mortgage life insurance. It can be designed to last only as long as the mortgage.
Level term insurance versus decreasing term insurance.
The rates for level term insurance should be compared to the rates for decreasing term insurance.
The premium of the term insurance can be guaranteed for the length of the mortgage.
Using permanent life insurance.
Permanent life insurance, such as whole life and universal life, can be used as mortgage life insurance. They will provide a survivor benefit. They can also provide cash values while the insured is alive to prepay the mortgage.
Riders can be added to your mortgage life insurance policy to pay a benefit in case of critical illness. One key rider is to cover Critical Illness.