Mortgage Life Insurance and Mortgage Protection and You
Decreasing term mortgage life insurance pays your loved ones a lump sum if you die during the set term of the cover. The amount they are paid is contingent upon the term of the life insurance, which decreases just about in line with the amount that remains on your mortgage. By the end of the life insurance plan, the lump sum will be down to zero.
Decreasing term life insurance covers you for a set term. It will pay your dependents a lump sum if you die during that term. How much your dependents are paid will depend on the term of the insurance policy, which decreases roughly in line with the amount outstanding on your mortgage. The lump sum decreases during the period of the term by the end of the plan, it is down to zero.
How much your life insurance premium is depends on the sum to be insured, the period of cover, your age, your sex and whether you smoke or not. A non-smoker is usually defined as someone who has not smoked for at least twelve months. This kind of insurance is not great for investment purposes, as there is no maturity value payable at the end of the plan.
Although the mortgage life insurance cover reduces, your monthly premiums will stay the same throughout the policy. With some decreasing life insurance policies, you can have additional options, such as critical-illness cover. Adding critical-illness cover will mean the plan pays out if you get a qualifying critical illness or if you die during the term of the policy.
Decreasing Mortgage Life Insurance Pros and Cons
Decreasing life insurance is great if you are keen to leave a cash sum to your loved ones to help pay off your mortgage after you have died. Decreasing life insurance is also cheaper than term life insurance, which pays out the same sum regardless of when you die.
Weighing against decreasing mortgage life insurance is the fact that the policy pays out only if you die or are diagnosed with a qualifying critical illness (if you have critical-illness cover). The policy will also have no maturity value if you live beyond the plan.
Mortgage protection is an important part of your mortgage needs. Your mortgage is a big financial commitment, so protection is very important. It is always important to budget for mortgage protection as it is easy to ignore these payments when looking at your monthly mortgage costs.
When financial advisors talk about a fully protected mortgage, they mean protecting your mortgage against every eventuality. The areas of mortgage protection are death; redundancy; critical illness, and long -term sickness.
Mortgage protection pros and cons
Mortgage protection is not compulsory. Mortgage protection might seem a depressing thing to think about. However, you could become ill and be without your income at any time. This is why mortgage protection is so vital. It’s a financial safety net and, now more than ever, protecting your mortgage is vital.
Mortgage protection is good because it need not cost the earth, your premium is based on the level of cover you need, how old you are and the size of your mortgage repayments. It’s also a way of protecting your savings if you fall ill and can’t pay your mortgage, you’ll soon eat into your savings. However if you have no earned income and are on state benefits, mortgage protection insurance will not be right for you.
Copyright (c) 2009 Mark Walpole