Mortgage life insurance

Mortgage life insurance is designed to help individuals to repay their mortgages in case of their death. The main principle is that when buying a house with mortgage a person also fills a paperwork to get this insurance. It is possible to get it either from the lender or from independent insurance company. It covers at least the remaining amount of mortgage and thus, if the insured person dies his dependents can be sure that they are not going to lose the house or face any financial difficulties by repaying the mortgage.

Moreover, it is wise to take a mortgage life insurance as over time more and more money have been invested to repay mortgage. Thus, having mortgage life insurance helps individuals to protect their property where they have invested a considerable amount of money.

The difference between decreasing term and level term mortgage life insurance

There are two kinds of mortgage life insurance: decreasing term and level term. First one covers the remaining amount of the debt and the second one guarantees some fixed lump sum that does not changes as time passes by. The difference is that if decreasing term insurance was chosen an individual has to pay stable premiums over time although the amount of money that is covered is decreasing as the mortgage is being paid off. On the contrary, level term insurance usually guarantees fixed lump sum and does not change as mortgage decreases. However, as the risk of person dying increases with him getting older, the premiums can also increase as time passes by.

Factors that have impact on the premiums of mortgage life insurance

Usually premiums are calculated by evaluating factors that include the age and gender because it is assumed that women tend to live longer and the older the person gets the higher the risk of death. Moreover, medical condition is usually checked and in some cases family medical history can be taken into an account. For example, a person whose relatives had cancer has higher risk of having cancer himself. Furthermore, it is likely that if the individual smokes, he needs to pay higher premiums.

Premiums also depend from the type of insurance selected and additional benefits that are opted. First, as decreasing life insurance policy is less risky for insurance company to issue (as potential payout to insured person decrease over time) lower premiums are required compared to level term mortgage life insurance. Moreover, it is possible to choose additional benefits such as Critical Illness cover or Mortgage Payment Protection Insurance at an additional cost. Mortgage Payment Protection Insurance covers mortgage payments if accident, sickness or other event hit the unemployment of the insured person.