Protecting Your Mortgage

Protecting Your Mortgage

Whether purchasing a new home or refinancing your mortgage, it’s a good idea to protect your mortgage in case the inevitable happens. If you’re not sure about getting mortgage protection, ask yourself this question: can your family make their mortgage payments without you?

An easy and cost effective way to protect your mortgage is by purchasing term life insurance. In the event of your death, term life insurance can be used to pay off your mortgage and other expenses, such as educational costs, personal bills and credit card debt. Life insurance can also serve as an income replacement so your family can avoid financial difficulties and maintain the same standard of living without you.

How Does Term Life Insurance Work?
Term life insurance provides protection for a specified period of time. A death benefit is paid to the beneficiary if the insured dies within a specified period of time while the policy is still in force. Many term life insurance plans can be converted to permanent life insurance plans without evidence of insurability.

Two types of term life insurance:

Yearly Renewable Term Life Insurance – Premiums (how much you pay) are initially low; however, the premiums increase substantially as the insured gets older. These plans have diminished in popularity due to the introduction of level premium term life insurance.
Level Premium Term Life Insurance – Premiums remain level over a specified period of time, such as 5, 10, 15, 20, 25, or 30 years. After the initial level period expires, the annual premium increases each year, subject to a guaranteed maximum.
Although the initial premium of a level term policy is higher than the initial premium of a yearly renewable term policy, the level term policy generally costs much less over a specified period of time. For example, compare the premiums between a yearly renewable term plan and a 20-year level premium term plan for $500,000 of life insurance:

Many mortgage companies will attempt to sell you life insurance to cover your mortgage; however, this coverage is often more expensive than buying an individual policy on your own. A level premium term life insurance policy offers an affordable protection that lasts the length of your mortgage.