When shopping for life insurance for homeowners, the question of whether to bundle these together into one type of plan comes up. There are plans available called mortgage protection insurance—aka mortgage life insurance—that pay off the cost of your home after you pass away, to protect family members or future generations from being responsible for it. Term life insurance, on the other hand, pays out a lump sum of money upon your death, which can be used for anything. Here is our breakdown of the different plan types and how to decide which one is right for you.
Mortgage Protection Insurance
Mortgage Protection Insurance plans are usually purchased along with the mortgage plan of your house. In the long term, term life insurance is often a better fit for anyone whose mortgage may decrease over time, but knowing all the available options can still help.
Mortgage Protection Insurance plans are often attractive for people with health issues because there is typically no medical exam required with this type of plan. For people who have been denied whole life insurance and term life insurance, mortgage protection insurance offers a smart alternate way to get some coverage. However, for the average healthy adult term life insurance often results in more money being left to the beneficiaries.
Mortgage Protection Insurance can be bought at the same time as a life insurance policy, so you can have your home covered under this type of plan while you allow your beneficiaries to use the funds from your life insurance plan for other expenses. For some people, buying a smaller term life insurance policy along with mortgage protection insurance can be a good solution.
Term Life Insurance
Term life insurance plans are the more standard type of life insurance plan for homeowners that is bought as a separate type of policy but can be used to cover the expenses of a home. Term life insurance plans offer a specific amount of money that will be paid to the beneficiaries upon the death of the policy holder, but there is an end date. This means after a certain “term” of time, the policy ends and if you want continued coverage you have to buy a new term. Generally longer terms are more expensive but offer a higher chance of being used.
When it comes to life insurance for homeowners, buying a term life insurance policy that lasts as long as the mortgage can be a good option. This way if you pass away before you can pay off the property, your beneficiaries can use the funds from your policy to cover the mortgage.
Choosing Life Insurance for Homeowners
When it comes to choosing which type of plan is best for you, it depends on the plans offered in your area and your individual circumstances. For most healthy people, buying a term life insurance to cover the expenses of a mortgage upon the event of their death will be the lowest cost option. Talking to an insurance agent is a great way to make sure you’re aware of all the possibilities where you live.
For people with health issues that might make a medical exam to qualify for life insurance plans difficult can also use mortgage insurance plans as a way to ensure that coverage. Some people also like the convenience factor of paying a mortgage protection payment along with the mortgage payment.