Mortgage life insurance is a lucrative tool to cover every possible threat against your mortgage repayments. You can either take them from your lender or can shop from the insurance market. Most of the borrowers are not aware of its technicalities, and thus they fail to make the right choice. Are you also among them?
Here is an in-depth insight into mortgage life insurance to help gain an understanding of how things work. Have a look –
Mortgage life insurance is a financial product that pays mortgage instalments after the death of the mortgage holder.
The mortgage insurance covers your mortgage and prevents the other joint mortgage holders or family members from staying in the house. It is lifetime security of your loved one to remain safe in the purchases even after your death.
Types of mortgage life insurance.
The role of insurance changes according to the type of work. Thus, you need to know both the types of mortgage insurance.
1. Decreasing term insurance
As the term denotes, this insurance decreases in its premium also the percentage of cover reduces with the decrease in the mortgage obligation. It is a less expensive option than the one about which you will read, as the other type. At the end of the policy, the payout is small.
2. Level term insurance
Level term insurance is a costlier option, and the reason is that it does not decrease in the amount. You can fix the amount of the insurance. For instance – you have fixed the insurance at £1,50,000. It can remain the same during the complete insurance term. However, the monthly premium also remains the same. If you die, your family members will receive the complete money. That can be used to pay off the mortgage, and if there is any amount left, it can be used for other purposes such as household bills etc.
Important aspects to consider when you take Mortgage insurance.
Your decision of mortgage insurance should be rational and sensitive, and for that, you need to consider the following points.
- If there is no dependent after your death, a simple mortgage cover through decreasing term insurance is fine. However, if you have people that depend on you then take level term insurance. It leaves them with saving from the insurance money after paying off the funds.
- Before you take the insurance, improve the debt-to-income ratio because you will be paying the mortgage instalment as well as the premium. It is necessary to be sure that you can pay off the premiums.
- Never come under the pressure of your lender to purchase any particular insurance term. There are limitless options available in the market. You should shop around for the best possible and cheapest option.
If you are taking the mortgage from a broker, you can get many options at one platform. Every mortgage broker in the UK has many insurance companies on its panel. There is no need to decide in haste because a wrong selection of the insurance product can make you regret for a long time.
Your Medical history affects insurance premiums
Of course, that affects the insurance deal because the health concerns of the mortgagor create risk for the company. The higher are the threats to your health. The higher are the insurance premiums. Different insurance agencies have various policies on the type of health issues.
For instance – the issues such as blood pressure, diabetes etc. for every disease, there are varied ways to tackle the situation. The big health issues like cancer, AIDS, etc., can even affect your eligibility for insurance. Such cases are always risky for not only the insurance company but also for the lender.
It is always advisable to stay healthy through a balanced lifestyle to avoid an expensive deal. The phrase ‘health is wealth’ is not incorrect.
Things you should not do while taking mortgage life insurance
There are few things that you need to avoid to get a safe and sound insurance deal. –
- You should never hide any information from the insurance company. Whether it is a financial condition or health condition.
- Never decide on the words of other mortgagors in your family and friends. Your case is always different from them, even if the insurance product is the same.
- Never get driven by the exaggerated advertisements of insurance companies. They can be fake, always take the insurance from a reliable place.
Mortgage life insurance is a necessary product, and it adds a strong shield of security. There is so much to explore in the name of the benefits of this supportive thing. However, it is also important to make a wise decision. Due to the ignorance of the insurance products, people make mistakes and take a wrong turn in the selection of the insurance company. Take professional advice and look at your financial conditions because correct decisions demand calm attention.