A life insurance for mortgage protection policy is a term life policy designed specifically to repay mortgage debts and associated costs in the event of the death of the borrower. These policies differ from traditional life insurance policies because they are specifically pegged to the mortgage. These policies are also distinct from the mortgage insurance that lenders often insist that you take out. That insurance pays off the amount owed to the lender only; should something happen to you; the money will go directly to the lender. Its premiums are usually part of your monthly mortgage payments. And lenders will allow you to cancel such coverage when you have a certain amount of equity in the house, and they know they will be able to recoup the remainder of their loan through a sale.
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Mortgage Protection with Life Insurance
A life insurance policy can help pay off your mortgage and ensure the protection of your family's home. Customize a solution with a New York Life agent today.
The decision to get life insurance is often influenced by a major life milestone. When you get married or become a parent, you gain a new dependent who may rely on you. Life insurance also comes into play when you take on a large financial obligation like buying a home.
Life insurance for mortgage protection is a reliable way to establish financial stability and secure a home for your family. Life insurance helps ensure that the financial debt you owe toward your home can be paid if something happens to you.
Life insurance for mortgage protection.
Your home is more than a roof over your head. It’s a place where your family will grow and your life will evolve. It makes sense to have a policy in place ensuring that your family will be able to keep their home no matter what lies ahead. A New York Life financial professional can help you select the life insurance coverage that will fit your needs.
The benefits of protecting a mortgage with life insurance:
- In some cases, a combination of coverage types may provide more benefits than a single product solution, better protecting your home in the event that you pass away unexpectedly.
- The balance owed on your mortgage would always be covered by the combination of one or multiple life insurance policies.
- Using life insurance for mortgage protection can alleviate the risk of someone being left with an unmanageable financial burden. Many people want to protect their home for their loved ones but aren’t sure what kind of life insurance to purchase.
- Customizing your coverage can provide short-term protection when your mortgage amount is highest and long-term protection to cover the entire duration of the mortgage.
- The combination approach can work within your budget, provides flexibility and can be designed to cover all mortgage payments.
Using life insurance to help cover your home mortgage.
There are various ways to use life insurance to help cover your mortgage, whether through a combination of policies or a single policy tailored to your needs.
Option 1 Using one policy
- You purchase a term life insurance policy with the benefit amount that matches the outstanding balance of your mortgage. This policy lasts for the full term of your mortgage (30 years). In the event of your passing, your family can use the death benefit to either pay off the mortgage or make continued mortgage payments.
Option 2: Using two policies
You purchase a whole life insurance policy to provide long-term coverage that fits your financial situation.
Additionally, you purchase a term life insurance policy to cover the balance of your mortgage for the early period (10 to 15 years) when the amount owed is the highest. This will allow your family to pay off the mortgage or continue making payments if something happens to you.
A New York Life financial professional can help you customize your coverage for your specific situation.
Bear in mind that you have financial obligations beyond your mortgage, so you will probably want any coverage to cover additional expenses. Childcare, saving for retirement, and medical expenses also need to be considered when you purchase your life insurance policy. Your coverage should take the entire range of your financial needs into account.
Mortgage protection insurance FAQs.
Whole life insurance and term life insurance can all provide a means of paying off your mortgage. With each type of insurance, you pay regular premiums to keep the coverage in force.
Life insurance can be used to help your dependents pay off your mortgage if you die. This type of strategy involves a life insurance often sold as a decreasing-term policy, so your payout reduces as you gradually pay off your mortgage. A life insurance claim is typically paid out as a lump sum.
If upon your passing no one has been designated to inherit the loan and no one makes mortgage payments, the lender will still need to collect the debt. The lender usually ends up selling the home to recoup the debt. If someone intends to keep the home, they must continue to make mortgage payments.
There are no legal limits as to how many life insurance policies you can own. Many people have life insurance coverage through their employer in addition to their own term life policy or permanent life insurance policy. However, each policy needs to be underwritten and may impose a limit on the face value or death benefit.
A house is more than a home; It’s a place for families.
Learn more about life insurance can help protect a mortgage.
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Want to learn more about life insurance to help protect a mortgage?
A New York Life financial professional can help determine what’s right for you.