What is Mortgage Life Insurance and Should you Get It?

SamanthaVin | Jan 28, 2011 |

0 Comments | Rating: 0

When you apply for a mortgage, you'll have lots of papers to read and sign. Within those papers, you will be asked if you want to get mortgage insurance. Before you jump and do anything rash, you should clearly understand what it is and how it will affect you. Is it useful? What will happen if you don't have it? How much will it cost? All of these are reasonable questions that you should be able to answer.

Buying a house is taking on a risk when you use a mortgage to pay for most or all of it. You are risking the fact that you might not be able to pay it back, and so is the bank. The bank really wants to make sure they get their money which is why they really push getting mortgage life insurance. Just because they really push you to get it, doesn't mean it's all in their interest. It still might be a very good option for you.

Mortgage insurance is a form of life insurance in the sense that it kicks in when you die. If you have mortgage coverage and you die before your mortgage is paid off, the insurance will pay off the rest of the mortgage. You could owe $5,000 or $150,000. It doesn't matter, it should be paid.

The bank likes this because they know they will get paid if you die. The bank will get the money right away and your beneficiaries will get your entire house without having to worry about a mortgage. If you live with a family that you help support, this is a really good thing. The last thing your family will want to do when you die is worry about paying off a mortgage. Even if you're the only one living there, they can choose to live in the house mortgage free or sell it for full profit.

Sometimes people get mortgage life insurance only because they can't afford regular insurance. For example, life insurance for senior can be expensive, but they know that if their house will be taken care of, at least their beneficiaries will be able to use that money to take care of the rest of their estate.

The benefit of mortgage insurance decreases while the premiums stay the same. This is probably the biggest downfall. Do you want to be paying premiums when the benefit is only going to be $10,000? It all depends on whether you think it's worth it based on how much you're paying for premiums. If the amount is negligible, there is no reason to throw away even a few thousand dollars just because of a small monthly premium that is part of your mortgage.