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Wednesday, 19 November 2014

Mortgage Life Insurance Explained

Mortgage Life Insurance Explained
With more and more of us getting on the property ladder it is vital we think about the future and what will happen to the mortgage if we were to unexpected die. In some countries like the UK it is mandatory that a mortgage holder takes out a life policy to cover the mortgage amount in the event of the policy holder’s death.

Mortgage Life Insurance is different from general Life Insurance. Mortgage Life Insurance covers your mortgage, not your life or any other debt.  There are two types of Mortgage Life Insurance; decreasing term mortgage life insurance and level term mortgage life insurance.

Decreasing term mortgage life insurance
This type of policy covers a reducing sum. As you pay off your mortgage, your remaining balance decreases. The policy will pay out the remaining balance of your mortgage should the worse happen to you.

This type of policy is only really appropriate for people with repayment mortgages, who gradually pay off their mortgage capital over time.

Level term mortgage life insurance
This type of policy covers a fix amount, so if you were to protect $150,000 no matter when a claim is made the policy will pay out $150,000. So, even if you only owe $100,000 on the mortgage, your policy will pay you an additional $50,000. This policy type is ideal if you want to leave your loved ones a little extra on top of covering the mortgage.

How mortgage protection insurance premium is calculated

When working out what premiums to charge, insurers will look at the likelihood of the insured dying during the policy term. The sort of things they will take into consideration include
  •  Age
  • Sex
  • Health
  • Occupation
  • Weight
Compare insurance policies
Like with any other type of insurance make sure you read the small print to ensure the policy best suits your needs. Remember, cheapest is not always the best.

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