Mortgage Life Insurance: Do you Need It?
To make the most of current low interest levels for refinancing homes, requires analysis of countless options. It can feel like an advanced degree in law is required to make sound decisions for the best deals without paying more than necessary. You need to figure out the best buy and what to avoid.
A good start is to consider redundancies to avoid duplicate purchases. Don't buy the same thing twice due to two different names. For instance mortgage life insurance promises mortgage payments in case of disability or death.
Mortgage Life Insurance…
Mortgage life insurance can give you peace of mind by ensuring full repayment of your mortgage in case of terminal illness or death. Mortgage life insurance provides a lump sum to repay outstanding mortgage capital on death or fatal illness. The premiums to be paid decrease each year in line with the decreasing sum owed to the mortgage lender. In case of a repayment mortgage, your monthly payments repay both the interest and capital initially borrowed, requiring mortgage life insurance to spare your family mortgage repayments after your death.
Current low home mortgage interest rates are prompting more and more people to become homeowners. Of these many are first-time buyers who never expected to be able to own their own place. They have almost no knowledge of the value of mortgage life insurance. People are increasingly taking out critical illness policy to pay off mortgage when critically ill. This makes sense as 1 in 4 men and 1 in 5 women are likely to suffer a critical illness before retirement.
The policy ensures that apart from death or terminal illness, critical illness will also result in repayment mortgage being fully repaid. Thus it can be a big relief. It should be possible to buy a combined mortgage life insurance policy and critical illness policy with a guaranteed fixed premium. This is a major advantage due to many life insurance companies not offering a guaranteed premium on the purchase of critical illness insurance alone.
Criticized By Federal Insurance Regulators
Mortgage life insurance has come under criticism from consumer advocates and federal insurance regulators, who warn homeowners that it may not be good value. The main concern is that unless you die or become disabled before your mortgage is paid, a mortgage life insurance policy pays nothing. In contrast, a standard policy pays your policy amount to beneficiaries on death. According to the National Association of Insurance Commissioners (NAIC), mortgage insurance lenders pay out only about 40 cents in benefits for every dollar spent by consumers on this type of policy, while it is 90 cents on the dollar paid out to consumers with regular term life insurance policies.
However, at least one reason may cause some to buy mortgage life insurance policy as there is no medical examination. It is thus a viable option for homeowners with health conditions that prevent them from taking other types of life insurance.
But in general, during refinancing your existing life insurance coverage must be analysed. If sufficient to cover your mortgage, nothing more would be required. Or you may wish to increase the amount of regular term life insurance you have.

Original article on SpectrumInsuranceGroup.com