A life insurance policy can protect your family from the financial obligations of making mortgage payments without your salary. In the event of your death, your family will still be accountable for mortgage payments, which may be unaffordable without your contribution.
For protecting your family from bearing such a burden and possibly losing the house, you should purchase a life insurance policy. Although there are other insurance options available too, for example, mortgage protection insurance, the wisest and most economically sound choice is to buy a life insurance policy.
The death benefit of your life insurance policy should include your mortgage’s amount. On the occurrence of your death, the proceedings of the policy will cover the entire cost of your mortgage, your house will be paid off, and your family will have one less thing to worry about.
If taking out a mortgage has already substantially cut into your finances, life insurance is even more important. Although your mortgage payments may make paying premiums for a whole life insurance policy unimaginable, there are cheaper options.
As an alternative to purchase a permanent life insurance policy or mortgage protection insurance, explore the option of buying a term insurance policy for the same duration as your mortgage. This alternative is much less costly. The premiums will be considerably lower, but the coverage will remain the same.
At the end of the life of the policy, you can decide whether you want to convert or renew the policy or if you would rather discontinue the policy. This approach guarantees mortgage protection at the lowest cost.
In terms of cost, the best choice is decreasing term life insurance. If the main reason for purchasing a life insurance policy is for mortgage protection, investing in this type of term insurance is your best bet.
At the start of your mortgage, you owe the most to your lender and your mortgage protection should reflect that. However, since after a few years of making payments, you will owe significantly less, decreasing your protection is a logical move. A decreasing term life insurance policy allows this.
You can also design your life insurance policy so that your protection is the same amount as your debt. Although the premiums do not decrease over time, your mortgage life insurance quote will be considerably lower than if the quote you would receive and if the coverage of the policy were level throughout its term. Some policies annual premiums are the same as the level coverage, but the payments end earlier than the end of the policy. For e.g., the premiums on a 20 year mortgage protection insurance policy are required to be paid for only 16 years even thought the coverage will last all 20 years.
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