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Mortgage Life Insurance
If you are the breadwinner in your household, one of the biggest financial worries for your family in the event of your death may be paying your mortgage. Your spouse may be left with a very considerable mortgage if you have only recent purchased a house and, when added to the costs of childcare and education, he or she may struggle to cope. Alternatively, your spouse may be near retirement age, and your mortgage may be near payment. Would it not be a true gift to him or her to ensure it would be fully paid off in the event of your death?
Consumers who seek to ensure that their family are not saddled with the substantial costs of a mortgage may consider it prudent to invest in mortgage life insurance. Mortgage life insurance will pay off your mortgage if you die with mortgage debt still outstanding. Policies typically charge you at premiums which gradually decrease in time, as the outstanding value of your mortgage reduces. It may be particularly important to you that you have mortgage life insurance to cover the value of a repayment mortgage, as this avoids your family facing the considerable capital cost of the mortgage along with interest, on the event of your death.
Mortgage life insurance has become an increasingly important financial policy because of the increasing number of consumers who opt to buy property. Low mortgage interest rates and falling house prices have acted as incentives for first-time and experienced buyers to snap up houses and premises, and many are simply unaware of the advantages and disadvantages of mortgage life insurance.
Indeed, some consumers have opted to buy critical illness cover instead, which ensures that the mortgage is paid off in the event that you get seriously ill. To some extent this is a sensible strategy: 25 per cent of men and 20 per cent of women suffer a critical illness even before retirement. You may also purchase critical illness cover with mortgage life insurance to guard against the financial implications of both critical illness and terminal illness or death. But what if you want to play your luck and assume you will not get critically ill: is mortgage life insurance always the best option?
A disadvantage of mortgage life insurance is that it may not pay anything out if your mortgage payments are complete before you die or become terminally ill. This sounds like a strange problem – many people would be happy to know they were going to live so long! But in terms of finding good value in a life insurance policy, this may act as incentive to look elsewhere. Indeed, one option is to simply pay for a standard policy that would ensure your loved ones receive the policy value on the vent of your death. They would then have considerable freedom to use this money to pay off the mortgage or even redirect it to other costs, such as childcare and education costs, if they believe these needs are greater. However, be prepared for a medical exam if you opt for a standard policy – indeed you avoid this by opting for mortgage life insurance, which is worth bearing in mind if you suffer from health conditions.
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