Mortgage life insurance is the cheapest type of mortgage insurance available, but it is not without its pitfalls. It is essential to understand the differences between these two types of insurance. Although many people think they are the same thing, they are pretty different. It is indispensable for you to know exactly what each of them does for you.
For starters, mortgage life insurance is not something that will pay you back the money that you have borrowed against your home. It is meant only to replace the premiums on your existing mortgage, and these premiums are included as part of the mortgage, so you will never see a penny from it. On the other hand, mortgage life insurance is a product that will replace your existing life insurance policy for you and payout the death benefit on a tax-deductible basis.
Therefore, the amount of money you can get at tax time will be based entirely on the amount of money your family would have paid into the policy over the years. This makes mortgage life insurance the better of the two options. However, you should note that you cannot use your mortgage to purchase this product. This is because the premiums associated with the policy already include any amount you may save by opting to take out a loan. Therefore, mortgage life insurance is not a product you can utilize on a tax-deductible basis.
What does this mean for you, though? If you purchase insurance to replace your life policy, you will have more money at the end of the road if you should die. This is especially true if you take out an adjustable-rate mortgage, which many do today. The best thing about life insurance is that you do not have to worry about paying anything back on the policy until it is paid off.
However, if you have a fixed mortgage rate, you may be concerned that you may lose money if interest rates fall. While the mortgage is often set at a low rate today, please do not count on it rising that far in the future. It is possible that the lender could file a claim against your mortgage in the event of you dying, but this is not something that you need to fear. If you purchase enough life insurance coverage to replace the mortgage, you will be covered and not have to worry about losing your home.
Before purchasing mortgage life insurance, you should carefully review your budget to ensure that no gap will allow too much of the premium money to go to taxes before the death benefit is received. It is also essential to compare life insurance quotes. While this may seem like an unnecessary step, it is imperative to compare rates, and this way, you can find out who has the better deal.
You may feel uncomfortable with someone suggesting a product you are purchasing. This can be problematic because people tend to trust those they know and have a relationship with, while strangers may not feel so warmly inclined towards the suggestion. You should always make sure that your agent discloses all of the facts before purchasing life insurance, including the product's advantages and disadvantages.
You may think that you are saving money on mortgage life insurance by raising the amount of the premiums, but there are several other costs involved that you might not be aware of. You will have to pay out of pocket if you increase the deductible before the death benefit kicks in. Therefore, do some research ahead of time to see your particular situation and choose the best product for your financial situation. It is easier to do this online because you can request quotes from several life insurance companies without leaving your home.