Updated: Mar 5, 2021
Your home is likely your biggest investment. It takes a great deal of planning and savings to purchase a home and it's extremely important that you insure that investment so that if a tragic event occurs, your loved ones won’t have to have the prospect of selling and downsizing to a more affordable home.
Traditionally mortgage providers (banks) have done a great job introducing, or in many cases "pressuring" people to buy Life Insurance tied to their mortgage. What most buyers don't realize is that they can say "no" to the Insurance offered by the mortgage provider, and that they are often better served buying their own term Life Insurance policy, which in not directly tied to the mortgage.
If you do choose to purchase Life Insurance through your mortgage provider, keep in mind that the Insurance only covers the outstanding mortgage amount. As your mortgage decreases so does your amount of Life Insurance coverage...BUT your payment/premium does not decrease. Additionally, Life Insurance you purchase with your mortgage tends to do "underwriting at time of claim", which means the Insurance company can determine the claim is not payable after your death. This is why it' s always better to have your coverage confirmed at time of purchase. That way you can rest assured that you have the protection that you and your family are counting on. Another thing to consider is that Life Insurance that is directly tied to your mortgage, gets paid to the mortgage provider and paying off the mortgage may not be the best financial decision for your family. It may make more sense for your family to receive the tax free Life Insurance funds and use the money in a way that is best for their situation. Lastly, Life Insurance that is tied to a mortgage tends to cost more, which is particularly frustrating given the fact that your coverage will decrease over time.
There are other ways that you can go about purchasing Life Insurance to cover the amount of your home mortgage. If you insure both spouses, using term Insurance, you make sure that if a life is lost, all or a large portion of your mortgage can be paid from Life Insurance proceeds. These proceeds would be tax free and will allow the remaining family members to stay in the home, if that's what they choose.Plus, iClick Financial Services makes it simple to purchase term Life Insurance. No medical exam, no sales calls, it can be a fully online purchase.
A flat term Life Insurance policy will always pay out the full amount you purchased, even if over time you have paid off a significant portion of your mortgage. This allows beneficiaries to use the tax free proceeds in whatever way that best suits their financial needs. Get a quote for term Life Insurance today.