Most US families carry mortgages on their homes. So it’s safe to say that, if you’re the primary wage earner in your family, you’re probably thinking about how to protect your family from financial disaster in the unfortunate event that something bad were to happen to you. And this is even more important if you don’t have adequate savings. You may not know this, but term life insurance can be a solution to this problem.
In fact, term life is one of the best mortgage protection options. The way it works is pretty simple. You buy the policy and, if you pass away during the “term” when the policy is in force, your family receives the value of the policy. They can afterwards use the proceeds to pay off the mortgage. Or for anything else. The proceeds are often tax free.
Another option is mortgage life insurance. Just like term insurance, you pay regular premiums to keep the coverage in force. However, unlike term insurance, the beneficiary of a mortgage life insurance is your mortgage lender. If you pass away, your lender is paid the balance of your mortgage. The downside is that your survivors won’t see any of the proceeds. Also, although the value of a mortgage life insurance decreases over time, as the balance of your mortgage decreases, the premiums may stay the same.
You should compare the term life insurance and the mortgage life insurance rates and before buying a policy. Although term life is slightly more expensive, it may better suit your needs.