Life Insurance
Disadvantages of Mortgage Life Insurance – Why Term Life is Better
Term Life Insurance Policy
Why term life insurance is better
1. Term life is more affordable: Because the underwriting process in mortgage term life is not as precise as that of a term insurance policy, the premiums can be quite high for mortgage life insurance. Term life is generally more affordable, with its economical premiums.
2. Death benefits in term life go to the insured’s beneficiaries: When you use a term life policy to cover your mortgage dues, your beneficiaries are in total control of the money. If you die many years into your term policy, your mortgage dues would have gone down considerably, which means that your beneficiaries get to retain any leftover cash.
3. Term offers a choice of policy formats: While mortgage life insurance has a decreasing term format, with term life you can opt for either decreasing term insurance or level term insurance. A decreasing term insurance policy will provide your beneficiaries with only enough money to clear your mortgage. A level term insurance policy on the other hand has a fixed death benefit amount, and therefore can be used to clear off more than just your mortgage amounts. For higher premiums you can also add more protection for other reasons, such as to replace your income, take care of your kids’ college fees, etc.
4. Doesn’t require a fresh policy if you decide to change As mentioned earlier, if you decide to refinance, your mortgage life policy ceases. However, with term, even if the underwriting process requires your mortgage documents, the life insurance can’t be revoked each time the structure of your finances change.
Make sure you are covered adequately
When you use a term life policy to cover your mortgage, remember that you need to take out additional term insurance to cover your other financial obligations in the event of your death.
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