Should You Get Mortgage Life Insurance?

When you get a mortgage, the lender will include a mortgage life insurance that you can opt out of. If you purchase the mortgage insurance as part of the package, you will get a discount from the interest rate. There is, however, a better alternative.

Mortgage insurance is a decreasing term insurance. It covers the term of the mortgage, and the death benefit decreases each year according to the size of the mortgage debt. The premium will stay level, even though the size of the death benefit will decrease over the years.

Compared with term life insurance, mortgage insurance is more expensive, and the death benefit goes directly toward paying off the remaining principle of your mortgage, not the designated beneficiary of the insured. You can actually purchase term life insurance that covers the size of your mortgage debt, as well as other financial obligations, and opt out of the mortgage insurance plan, and request the same discount rate from the lender based on the fact that you have an alternative insurance in place.

Mortgage insurance is good for those who have a negative health condition, because it generally doesn't require the insured to pass a medical exam. If you are healthy, however, it is better for you to buy the term life insurance because it is cheaper.

For term life insurance, if anything happens to the insured, the death benefit from the term insurance will go to the beneficiaries first, and they can pay off the remaining balance of the mortgage with it, or choose to pay off debts with higher interest rates first. The rest of the death benefit will go to the funeral costs, and the living expenses of the survivors.

Term life insurance is cheaper, and the payout is larger. The death benefit stays constant throughout the term, unlike mortgage insurance, in which the size of the death benefit decreases over the years, and drastically in the later stage of the mortgage.

Having mortgage life insurance is good for people who are in bad health, but have a family to support. The insurance proceeds will pay off the house in full for the survivor, so one less thing to worry about. If you are healthy, and want to ensure the financial well-being of your family if anything happens to you, then term life insurance is the best choice. Make sure you opt out of the mortgage insurance after you have purchased the term insurance.

If you are planning to do that, go online to get term life insurance quotes, and see what the best deals are. There are 30 year term insurance plans. Make sure you buy those, because a 30 year term is still affordable for most people. If you buy online, you will get a cheaper deal than doing it offline, because the same insurance company that sells you the same product doesn't have to pay the agent when you buy it directly from them.