A mortgage life insurance policy is specifically designed to provide sufficient mortality protection to clear any loans that are secured on the property. Unlike level term insurance, decreasing term life insurance takes into account that less coverage is needed after each house repayment. Provided that the premiums are maintained, a policy will pay out a valuable cash lump sum until the mortgage is cleared. This happens regardless of whether the insured passes away in the first or last week of the policy.
Why is Mortgage Term Life Insurance Essential?
It is hard enough trying to deal with the emotional ramifications of the loss of a loved one, let alone negotiating the financial consequences. Whilst the loss of the primary bread winner can be catastrophic, losing a partner who cares for the children (even if they don’t generate an income) can be equally costly. Consider who will care for the children and how the expense of childcare will be met. This is why a joint life decreasing term life insurance policy is so important. Sadly, most people don’t really appreciate how this will affect them until it is too late.
Mortgage Life Insurance is More Affordable
Should a family have minimal disposable income, decreasing term life insurance provides coverage at the lowest possible premium. This means that it is possible to take out a joint life policy so the survivor (if applicable) receives a lump sum payment. Mortgage term life insurance is less expensive for both women and non smokers as the statistical likelihood of death is lower. Those who have pre-existing medical conditions are likely to find that these are excluded without their policy being any cheaper.
Critical Illness and Decreasing Term Mortgage Life Insurance
It is important to consider protecting the family with a combined life and critical illness insurance policy. Whilst less than 1% of mortgage life insurance policies will ever need to pay out, this isn’t the case with critical illness coverage. Not everyone will die following cancer or a heart attack, but they will need time. The person who suffers a life-threatening illness receives a cash lump sum and can focus on making a full recovery. This is particularly important if the insured lives but is no longer able to work.
Decreasing Term Life Insurance May Be Inadequate
Whilst a mortgage life insurance policy provides valuable protection in terms of ensuring that the mortgage is paid off, it doesn’t help with other bills and expenses. Level term insurance provides a larger lump sum payment which could help with personal debt, funeral expenses, household bills or school fees. Decreasing term mortgage life insurance may not be sufficient for all families so it is important to discuss alternatives with a financial advisor.
