Buy Mortgage Life Insurance
Buying a new home is an exciting time. But as thrilling as it may be, there are a lot of decisions that come with the purchase of a new home. One decision you may ponder is whether you should buy mortgage life insurance.
buy mortgage life insurance
Mortgage life insurance is usually sold by the mortgage lender, an insurance company affiliated with your lender or another insurance company that mails you after finding your information via public records. If you buy it from your mortgage lender, the premiums can be rolled into your loan.
The mortgage lender is the beneficiary of the policy, not your spouse or other person you choose. This means the insurer will pay your lender the remaining balance on the mortgage if you pass away. Money does not go to your family with this type of life insurance.
Mortgage life insurance can give you and your family peace of mind that the mortgage will be paid off. That may also be the case if you buy other types of coverage and specify that you want proceeds spent on paying off the mortgage, but mortgage life insurance benefits go directly to the mortgage lender.
A term life insurance payout goes to the beneficiary you choose, such as your spouse. The beneficiary can use the money for any pressing financial need. You also make your own choice of coverage amount and policy length with term life. Your family could use a term life insurance payout for:
Other life insurance types will give your family control over how a payout is used, such as whole life insurance. But for covering specific debts like a mortgage, term life insurance will give you the most value for your money.
The death benefit for mortgage life insurance goes directly to your mortgage lender who will use it to pay off the remainder of the mortgage. The problem with mortgage life insurance is the lack of flexibility. The death benefit can only be used to pay your mortgage and cannot be used to pay down other debts.
For many, the biggest deal breaker is the lack of flexibility. With mortgage life insurance, the death payout goes directly to your mortgage lender. With term life insurance, the death benefit goes to your beneficiary who can use the money as they see fit (including paying off the mortgage).
You can typically insure two co-borrowers under one mortgage life insurance policy. If you pass away at the same time, the policy pays off the mortgage. If only one borrower passes away, the coverage continues on the other person.
A mortgage insurance policy might not move with you. If you sell a house and pay off the existing mortgage, the life insurance policy could terminate. Check the policy for details on what happens if you move.
The last difference between MPI and traditional life insurance lies in the regulations involved. MPI policies have several strings attached that can change your benefits. For example, most MPI policies include a clause that states that the balance of your death benefit follows the balance of your mortgage. The longer you make payments on your loan, the lower your outstanding balance. The longer you hold your policy, the less valuable your policy is. This is different from life insurance policies, which typically hold the same balance for the entire term.
Many MPI companies also have strict limits on when you can buy a policy. Most companies require you to buy your insurance policy within 24 months after closing. However, some companies might allow you to buy a policy up to 5 years after you close on your loan. Your MPI company may also deny you coverage based on your age, as older home buyers are more likely to receive a payout than younger ones.
Actually, the proceeds from your policy can be used for any purpose your beneficiaries choose. If your mortgage has a low interest rate, they may want to pay off high-interest credit card debt and keep the lower-interest mortgage. Or they may want to pay for home maintenance and upkeep. Whatever they decide to do, that money will come in handy.
In addition, standard term insurance offers a level benefit and level premium for the term of the policy. With mortgage life insurance, the premiums may remain the same, but the value of the policy decreases over time as the balance of your mortgage declines.
Since you never know when the unthinkable will happen, mortgage protection from New York Life uses a combination of life insurance products to make sure your loved ones will always have enough cash on hand to keep up with the payments or retire the mortgage.
81% of adults agree that buying a home is the best long-term Investment In the U.S.* That's why we made sure our mortgage protection solutions include a layer of long-term protection such as whole life insurance or universal life insurance.
New York Life's mortgage protection solutions provide peace of mind and flexibility to customize your own policy. You can add riders, adjust your coverage, and take your policy with you if you move. Explore our full suite of life insurance options.
While both are important, the two have very different objectives. Homeowners insurance protects your property against physical loss or damage, and mortgage protection from New York Life uses a combination of life insurance products to make sure your loved ones have the money needed to retire your mortgage or keep up with the payments if you pass away.
In a word: flexibility. Our mortgage protection solution is unique because it gives you the freedom to customize it to meet your specific needs. And, unlike most lender-sponsored plans, benefits are paid directly to your loved ones (not the mortgage-holder), so they can use the money however they want.
Veterans Affairs Life Insurance (VALife) became available January 1, 2023 and offers guaranteed acceptance whole life coverage of up to $40,000 to Veterans with service-connected disabilities. Learn more about VALife. Lesser amounts are available in increments of $10,000. Under this plan, the elected coverage takes effect two years after enrollment as long as premiums are paid during the two-year period. Learn more about Veterans Affairs Life Insurance.Servicemembers' Group Life Insurance (SGLI) is a low-cost group term life insurance program for Servicemembers. Coverage can be extended for up to two years if the Servicemember is totally disabled at separation. Learn the difference between term and whole life coverage. SGLI coverage is automatic for most active duty Servicemembers, Ready Reserve and National Guard members scheduled to perform at least 12 periods of inactive training per year, members of the Commissioned Corps of the National Oceanic and Atmospheric Administration and the Public Health Service, cadets and midshipmen of the U.S. military academies, and ROTC members. Learn more about Servicemembers' Group Life Insurance.Veterans' Group Life Insurance (VGLI) allows Veterans to convert your SGLI to a civilian program of lifetime renewable term coverage after separation from service. Learn more about the difference between term and whole life coverage. VGLI Servicemembers with full-time SGLI coverage are eligible to convert SGLI to VGLI after separation from service. Learn more about Veterans' Group Life Insurance.Family Servicemembers' Group Life Insurance (FSGLI) insures spouses and children of Servicemembers with SGLI coverage. Spousal coverage may not exceed the Servicemember's coverage. Dependent children are automatically covered at no charge. FSGLI term life insurance coverage is automatically provided to spouses and dependent children of Servicemembers insured under SGLI. Learn more about Family Servicemembers' Group Life Insurance.Servicemembers' Group Life Insurance Traumatic Injury Protection (TSGLI) is an automatic feature of SGLI that provides payments to Servicemembers who suffer losses, such as amputations, blindness, and paraplegia, due to traumatic injuries that occur in service. All Servicemembers insured by SGLI are automatically covered by TSGLI. Learn more about Servicemembers' Group Life Insurance Traumatic Injury Protection.Veterans' Mortgage Life Insurance (VMLI) provides mortgage life insurance protection to disabled Veterans who have been approved for a VA Specially Adapted Housing (SAH) grant. VMLI is available to Veterans who received a Specially Adapted Housing Grant (SAH), have title to the home, and have a mortgage on the home. Learn more about Veterans' Mortgage Life Insurance.Service-Disabled Veterans' Life Insurance (S-DVI) closed to new enrollment after December 31, 2022. However, we began accepting applications for VALife on January 1, 2023.
Death. In the event of your death, the policy pays off your mortgage balance. Some policies may only cover an accidental death rather than a death from natural causes, so be sure to read the fine print carefully.
Unemployment. Similar to disability and illness coverage, your mortgage payments may be covered if you suffer a job loss. However, the policy may only cover a certain amount of payments and not the entire balance.
Instead of paying your mortgage lender directly the way mortgage protection insurance does, standard life insurance policies go to the beneficiaries you select, who can then choose to pay off the mortgage. Of course, this will only work if the policy pays out enough money to cover the outstanding mortgage balance, but many people plan for this when they purchase their life insurance policy.
Mortgage Protection Insurance (MPI)Standard Term Life Insurance CostA healthy 50-year-old man could get a 30-year, $25,000 policy for $1,188 annually.A healthy 50-year-old man could get a 30-year, $25,000 policy for $228 annually. Amount of coverageThe death benefit is limited to your outstanding mortgage balance amount.The death benefit is a specific dollar amount, such as $500,000 or $1 million. Who gets the benefitThe lenderYour family/chosen beneficiaries What gets paidOutstanding mortgage balance onlyMay cover your mortgage in addition to paying funeral costs and replacing your lost income for your beneficiaries. Guaranteed acceptance?YesNo Age limits?65+80+ Limited window to purchaseYesNo Covers unemployment?YesNo 041b061a72