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 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.
Mortgage protection life insurance.
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 best fit your needs.
The benefits of mortgage 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 two 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 cover your home mortgage.
There are times when you may need to combine insurance policies in order to meet your specific needs, such as paying off a mortgage.
Here’s how it works:
- When you buy a home, you take out two insurance policies: a whole life policy that will provide the amount of long-term coverage that best fits your situation, and a term policy that will cover the balance of your mortgage for the short-term early period of the mortgage (10 to 15 years), when the amount owed will be highest.
- The term policy will last for a long enough period and carry a high enough benefit to guarantee that your family will always be able to pay off the mortgage should something happen to you.
- Your family will be able to use its discretion when deciding how to use the death benefit. They can use it to pay off the mortgage in its entirety, to continue making mortgage payments, or to cover another need.
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 the combined policies 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.
A house is more than a home; It’s a place for families.
Learn how mortgage protection can protect more than just your home.
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A New York Life financial professional can help determine what’s right for you.