Richard Ross
Agent
One of the major expenses that you want to protect your spouse from after your death is the remaining mortgage payments. Following your death, the loss of your income can cause considerable financial stress, with mortgage payments topping the list of outstanding debts to pay. Life insurance is an effective way to plan for your family's financial security. In the event of your death, your spouse and dependents will receive the death benefit, tax free. This payout can be applied to a variety of expenses, including mortgage payments.
Private mortgage insurance(PMI) in the
The PMI may be payable up front, or it may be capitalized onto the loan in the case of single premium product. This type of insurance is usually only required if the downpayment is less than 20% of the sales price or appraised value (in other words, if the loan-to-value ratio (LTV) is 80% or more). Once the principal is reduced to 80% of value, the PMI is often no longer required. This can occur via the principal being paid down, via home value appreciation, or both. In the case of lender-paid MI, the term of the policy can vary based upon the type of coverage provide (either primary insurance, or some sort of pool insurance policy). Borrowers typically have no knowledge of any lender-paid MI, in fact most "No MI Required" loans actually have lender-paid MI, which is funded through a higher interest rate that the borrower pays.
Mortgage Life Insurance refers to an insurance policy that benefits the borrower and guarantees repayment of a mortgageloan in the event of death or, possibly, disability of the mortgagor. As with other types of life insurance, factors such as age, health and smoker/non-smoker are considered to determine the premium rate.
One downfall of mortgage life insurance is that it is very specific, meaning that the payout at your death can only be applied to the balance of your mortgage. Other expenses such as final expenses, credit cards, and unpaid bills will not be paid. Since your family will have a number of outstanding debts and expenses to pay for, you may want to consider a more flexible option. A standard life insurance policy may be a better alternative over mortgage protection insurance. You may want to consider a short-term term life insurance policy to provide adequate coverage to your family while allowing them the flexibility to make choices about where the proceeds are applied. There are likely to be additional expenses and debts that the death benefit can provide for - including education, childcare and saving for a college education. Visit the free online quote system for a comparison of costs for a variety of life insurance offerings.
No. Mortgage protection insurance and private mortgage insurance provide protection to your lender. Should you default on your loan, your lender will be protected by the insurance policy. However, mortgage protection insurance and private mortgage insurance do not protect you or your family in the event of your death. While private mortgage insurance is important because it allows lenders to offer you a loan even if you do not have the standard 20% down payment available, it does not protect you or your loved ones against repossession of your home should you be unable to make payments. In order to provide full protection for your family, you must purchase a mortgage life insurance policy.
Many lenders include the price of a private mortgage insurance or mortgage protection insurance policy in your monthly payments. However, you should not confuse this with protection for you or your family. When reviewing your loan policy, you should find out whether mortgage protection insurance is included, and even if it is, you should look into a mortgage life insurance policy to make sure your family is completely protected.