Today, the benefits of life insurance on mortgage insurance have been written a lot. As most already know, life insurance assures life for someone for a certain period of time. With mortgage insurance, a persons life is insured while mortgage loans exist. Credit insurance can also be applied to credit card loans, loans and credit lengths, but we will see exclusively on mortgage loans here.
The benefit of mortgage insurance is that it usually takes place at a reasonable rate and does not require a comprehensive medical test compared to a similar maturity insurance. The disadvantage, however, is that the insured pays the same premiums for this policy throughout the duration of the mortgage unless canceled despite the fact that the mortgage on the mortgage is reduced by each payment.
Like mortgage insurance, the mortgage policy will pay out when the insured or one of the insured passes away. The big difference is that the proceeds from the policy can only be used to pay off the mortgage. As mentioned above, if you start with a 500,000 mortgage and die in the last few years of your loan, your policy will only pay off whats left.
The best way for people to approach mortgage loan insurance is to regard it as credit protection and not as a standard insurance product. The fact is to look at it as a separate insurance altogether. The term life insurance or whole life or any other policy exists to replace the insureds income so that surviving family members do not have to sacrifice the things that would have come to them if the insured had not passed away. Items to consider are the insureds contribution to the monthly household expenses, contributions to retirement and infant childcare programs, and so on. In fact, the costs are high, which explains why people usually get insurance in hundreds of thousands or millions instead of tens of thousands.
With insurance pension insurance, insured shall evaluate whether the surviving spouse can handle payments without a spouse. Since the term insurance policy often replaces the deceaseds income in the event of death, there is a high risk that mortgage mortgage insurance may not be required.
If the term life insurance or whole life etc. does not allow surviving family members to enjoy the same material benefits that would have existed if the insured lived, then mortgage insurance is recommended.
To illustrate, lets look at a traditional family of four. Both husband and wife work and earn a single 75,000 each. They contribute to household costs. Their mortgage of 500,000 pays 2,300. They have a long term life insurance of 300,000 probably quite low considering their profits and assets. Every month, they contribute 750 to a savings plan because they expect to pay for their childrens education. In the event of a spouses death, the surviving spouse may expect to rely on life insurance payments and continue to pay for household expenses. But even at an aggressive 7.5 annual return on these profits excluding funeral expenses, the money would be completely exhausted after a short 7 years.
Depending on the family, is it reasonable to expect the surviving spouse to replace the income of the deceased in that case, double his own salary of 75,000 to 150,000 USD during that period of time? Once the funds are gone, mortgage loans will still be paid, bills will still be around, etc., etc.
With mortgage lending policies, the surviving spouse in the image above can make the life policy last 15 years and 6 months, clearly enough to see some of the children in school. In fact, with the children themselves leaving the house, that asset can even be sold and reduced to compensate for deficiencies in teaching and other expenses.
Of course, different people will have different needs in terms of mortgage insurance. There are major disadvantages, as noted here. However, as a financial planning, it is important to take into account all sources of insurance and needs are mandatory to ensure the risk of loss.