Why would I need mortgage life insurance?
Chris Clare
If you already have a life insurance policy, obtaining mortgage life insurance may seem like a pointless exercise, but is it?
What you may not know is that with a mortgage life insurance policy, in the event of your death, the outstanding balance of your mortgage will be covered, ensuring that your family will not be put under unneccessary financial pressure. With a repayment mortgage what happens is that the level of coverage will decrease in line with the decrease in the level of debt, ensuring that you are not paying more than your situation dictates.
You can choose to buy your mortgage policy on either a joint or single life basis. When you initially start up the policy, you will be asked to specify the exact length of time it will be required to run, known as the term of the policy, as well as the total amount of coverage required at the beginning of the policy. It is also highly advisable to include critical illness cover as a factor of your policy, which will cost you a little bit more again.
What the critical illness benefit is, is an additional benefit on the policy that allows the insurance company that underwrites the policy to pay out either on death of the principle insured, or upon the diagnosis of any of a number of specified critical illnesses, whichever should occur first.
The mortgage life insurance policy ends when the specified sum is paid out as a benefit. If you are lucky enough to survive the entire term of the policy, and the amount that has been insured has not been made payable through a loss, the plan then terminates and nothing is paid out.
The policy has no cash value at the end of its term. This also means that if you select a policy good for the entire term of the mortgage, the loan has been paid off as well so you do not need that coverage any longer. If you are in the midst of replacing a policy which is currently in force, make sure that you do not cancel your current mortgage life insurance policy until you have concrete proof that the new policy is in force. This seems like a pretty simple thought, but should you cancel your current policy and, for whatever reason not be approved for the new policy, you might find yourself uninsured and uninsurable.
The duration of your policy can run from any time between one and forty years. You may decide to run the policy in conjunction with your mortgage for its duration of for any part thereof. The decision for this will solely depend on your own personal financial needs along with what exactly your situation dictates.
Remember that most of the companies that offer this coverage will allow you, under certain circumstances, to increase the amount of the coverage that you have based on certain needs and criteria. A good example would be the increase in your mortgage maybe due to a home improvement loan. If you were a single homebuyer and then got married, you may, under certain instances, be able to re-evaluate your mortgage life term insurance to match your new circumstances.
There are many well-written, web-based areas that you can find via an Internet search, which will help guide, you through your search for the proper cover and the right life insurance company that will provide your policy.
To summarise, it is imperative that you seek the advice and expertise of a qualified insurance broker when seeking to obtain a mortgage life insurance policy. He will be able to show the advantages entailed in critical illness cover and whether it's for you. You will have to decide whether to cover the whole value of the mortgage and also whether the policy will run for the full term of the mortgage, if not longer. Happy hunting.
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