Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Mortgage Life Insurance

If you own your own home and are using a lender, then they have probably attempted to persuade you to purchase mortgage life insurance for your home.

Many people wonder what it is and whether they even need this type of insurance.

Mortgage life insurance pays off the mortgage on your home in the event that you die or become disabled.

Read on to learn a bit more about mortgage life insurance so that you can make an educated decision about your need for a mortgage life insurance policy.

Read on to learn more details of how mortgage life insurance works and then if you want to compare mortgage life insurance quotes (or regular life insurance quotes)just enter your zip above!

Mortgage Life Insurance Options

In the past mortgage life insurance wasn’t necessarily a good option for anyone. If you chose mortgage life insurance then you would pay a set premium for the life of the policy. For example, if you have a 30 year mortgage your premiums for mortgage life insurance might be $150 a month for 30 years.

The problem was that even though what you owed on your mortgage decreased and the benefit payout decreased the premiums didn’t. In addition, there was no cash value to the mortgage life insurance, which meant once the premium was paid you never saw a benefit from it if you survived the life of the mortgage.

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Traditional Term Mortgage Life Insurance

Today, however, there are two options for mortgage life insurance. The first option is traditional term mortgage life insurance. This insurance has a set premium for the life of the mortgage. The upside to choosing this option is that if you live until the mortgage is paid off then you are paid back all of the premiums that you paid to the insurance company.

The reason that they can offer this and still make money is because your premiums are put into interest yielding investments until they are returned; you don’t get the interest, the insurance company does. If you purchase a house young and plan on living in the house for the length of your mortgage, then this type of policy can be used as a nest egg, of sorts, for retirement.

Decreasing Term Mortgage Life Insurance

The other type of mortgage life insurance is decreasing term insurance. What happens is that after the first five years of paying the top premiums, your premiums decrease every couple of years to reflect the reduction in your mortgage and the benefit payout. This continues until your mortgage is paid off. You do not, in most cases, see a return of premiums when you choose this option. Instead the benefit is greatly reduced premiums over the years.

With both mortgage life insurance options you can choose terms of 5, 10, 15, 20, 25 or 30 years of coverage. Some people will choose coverage for less than the time of the mortgage if they feel that their family members can afford 5 or 10 years of payments on the mortgage.

Benefits and Problems with Buying Mortgage Life Insurance

The truth is, the benefits of buying mortgage life insurance are few. Most insurance experts will tell you that mortgage insurance is more expensive than purchasing a life insurance policy that not only provides living money for your family should you die, but to cover your mortgage as well.

As you have probably guessed, this is not always the case. One prime example of this is if you are overweight, a smoker, older or have other health issues. While mortgage life insurance is more expensive than regular life insurance, qualifying for it is easier. Most insurance companies don’t even require you to have a physical before purchasing mortgage life insurance. It is important, however, that you take note of any mention of pre-existing conditions, suicide or any other items in small print that might prevent the mortgage company from paying the benefit.

The biggest issue that many people face when purchasing mortgage life insurance is the fact that they can’t name their beneficiary; the beneficiary is automatically your mortgage lender. Some people simply prefer to let their family decide what they want to do with their insurance benefits and with mortgage life insurance that isn’t possible. In fact, is it usually your lender who initiates the discussion about mortgage life insurance. They have everything to gain if you say yes and it ensures that they get paid if you should die or become too ill or disabled to pay your mortgage.

NOTE: Some insurance companies offer a disability benefit that pays your mortgage payment if you are temporarily disabled and cannot pay your mortgage. Look for this as a rider option for your mortgage life insurance policy.

It is important to note that an insurance company, insurance agency, mortgage company, bank, or lender cannot compel you to purchase mortgage life insurance. Some will try to scare you into purchasing some by making you sign a bunch of waivers saying that you understand the risk of forgoing mortgage life insurance; don’t let this dissuade you from your decision if you have already decided to go with another insurance option.

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Other Life Insurance Options

You probably already know that you can purchase term life insurance or whole life insurance as an option to mortgage life insurance; but, did you know you could combine them? Instead of doubling your whole life insurance policy, you can purchase a whole life insurance policy to cover the costs your family will need for day to day living and purchase a term life policy that is enough to cover the cost of your mortgage. Term life policies are much less expensive than whole life and can be purchased for as long as 30 years, making it an excellent option for homeowners.

You can also purchase disability insurance in addition to whole or term life insurance. Disability insurance pays your bills for your while you are disabled. There are a couple of options for this type of insurance, companies like AFLAC offer temporary disability insurance for short term needs while your regular insurance company may offer long term disability options. The premiums for long-term disability will be much higher than premiums for short-term disability.

Whether you are going to purchase mortgage life insurance or another type of life insurance you will want to get the best rates possible. To do this, you want to compare the rates between different companies.

Free Mortgage Life Insurance Quotes Online

With a free quote tool, like the one on this page, you can get a quote comparing life insurance rates between multiple companies all in one place. It is important to note that most insurance companies will require a physical to confirm the information that you provide them about your health before they will guarantee their quoted rate; however, this will give you an excellent idea of the monthly premiums you can expect to pay.

One of the biggest benefits to using a quote tool is being able to view the information in a single location. This takes the guesswork out of the selection process and saves you time as well.

If saving money is import to you as well as having choices that are clear and easy to pick from, then it is time for you to try our free quote tool. Just enter your zip to start right now!