What is mortgage life insurance?
Mortgage life is a type of coverage for individuals who have a mortgage. It will eliminate or significantly reduce your mortgage if you pass away. The premium will be applied to your mortgage balance. This will make it easier for your family to remain in the home.
It is also referred to as mortgage protection life insurance or mortgage protection insurance. If you buy coverage from the bank, a premium will be added to your mortgage. It is a rather simple application process, which makes it attractive to many individuals. As a group insurance product, you can expect lower premiums compared to individual policies.
How does mortgage life insurance work?
The purpose of mortgage life plans is to protect your family if you pass. But it works differently than traditional life policies. Rather than receiving a specific premium upon payout, you receive less as time goes on.
Your overall payments are decided by the size of your mortgage. Your benefit is tied to how much you owe on your mortgage. So, as you reduce your mortgage balance, your benefit payout will decrease over time. Your monthly payments will remain the same. Some lenders offer a level-term option. With this policy, your payout does not decrease over time.
Plans allow you a 30-day period where you can review and choose to cancel. Your premium will be added to your mortgage. If you pass away, a lump sum payment will be applied to your outstanding mortgage loan.