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Should you get Mortgage Life Insurance?


By Sadiya Anjum

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Mortgage life insurance basically ensures that your mortgage payments are cleared in case you die or have been diagnosed with terminal/ critical illness. This policy runs for a fixed period of time and most people get it to run simultaneously with their mortgage. In case of a death or a critical illness, the company will pay you a lump sum to clear your mortgage. Undoubtedly this policy is for those who believe in the maxim ‘better safe than sorry’.

Mortgage life insurance has its own advantages apart from clearing the mortgage in the event of your death or an incapacitating disease. For instance, you only have to pay for the cover you need: as you decrease your unpaid mortgage over time, your insurance policy will also require you to cover that unpaid amount. Perhaps the biggest advantage that mortgage life insurance stands over a general life insurance policy is that the health standards required to take the former policy is much lower. So if you are in poor health and may not qualify for a life insurance policy, it maybe smart to opt for mortgage life insurance.

However this insurance has come under a lot of criticism for its most apparent flaw. Unless you kick the bucket or you’re diagnosed with some fatal disease before you clear your mortgage, this policy pays nothing.

So the million dollar question is – do you really need it? Well it depends on your situation. If you think you are financially in a position to clear the mortgage soon or your family members can continue to pay off the debt after you, then maybe you do not require it. On the other hand, if you are in delicate health and this policy could save the roof over your family’s head after your gone, then why not?

The ideal thing to do would be to get a financial planner or a life insurance agent to conduct a “needs analysis”. This will give you a better idea of the aspects you actually need cover for. If your life insurance policy is a substantial amount then taking out a mortgage life insurance may be unnecessary. Or you could choose to increase the amount on your existing regular life insurance.

Analyze your situation carefully and make the choice. If you do opt for a mortgage life insurance, make sure you shop around, compare premiums and benefits before you settle for one. Apart from this, watch out for the fine print. It should not be that you made your payments on time and when disaster struck, the fine print on the policy does not entirely cover your mortgage. You also need to check what the policy covers for – death (yes), critical illness (what kind?), terminal diseases (which ones?) and disability (if they cover or not). Get the best deal out there and this is possible only if you put some effort in hunting around.

If you choose not to get this insurance, make sure that your other insurance policies can safeguard your future as well as your family’s in the case of unforeseen events. The truth is that it is always better to be safe than sorry. You just need to work out if in your situation you are safe enough to not take out mortgage life insurance policy.

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