This policy is designed to protect a mortgage in case the policy holder dies or suffers from a terminal illness that impacts his or her ability to earn money before repaying it in full. The policy pays a sum of money equivalent to the outstanding mortgage. This safeguards the property from being auctioned or reclaimed by the mortgage provider for any unpaid fees. Here are five things you need to know about this policy:
1. Only Accessible After Death or Life Changing Conditions
This policy is only implemented after the death of the mortgage payer or after he or she is found to be terminally sick and would die within a period of one year. It helps ease the burden of mortgage repayment on those left behind as beneficiaries. Once the mortgage holder passes on or suffers from the stipulated conditions, the dependents can claim the benefits. The provider will intern verify the policy and pay the remaining mortgage balance to the bank in full, leaving the property loan-free. A mortgage life insurance policy is one way to reduce the debt bulk you leave in case of death or after incapacitation due to illnesses or accidents.
The policy is only applicable when there is a mortgage. The policy requires very few requirements making it easier to comply with and acquire. The policy requires a copy of the mortgage plan, identification documents, and the policy form filled when applying. Once the premiums are calculated, you can start making payments. Most policies do not request the policyholder’s medical records, making it cheaper and less demanding. To make claims, you would need the original copy of the policy, the identification documents and burial or death certificate of the holder. The policy can be held by an individual or by partners.
3. Should Be Equivalent to Your Mortgage
The policy should have the same value as your mortgage. The amount to be paid out by the insurer should be equivalent to your mortgage balance. The premiums, however, are fixed but the value of the mortgage decreases making it different from other insurances. The duration period should also be the same as that of the mortgage. The premium rate is calculated annually. In case of death, the balance equivalent to what you owe the financier gets to be paid out.
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4. Benefits Decrease With Each Repayment
Unlike other insurance policies, the value of a mortgage life policy decreases with time. It does not add value to you in any way to you if you complete paying or to beneficiaries when you are gone. Once you complete paying before having any physical disability, terminal illness or you fail to die; you do not get compensation. It might be too costly to acquire since mortgages stretch out owners a whole lot. Premiums should also be paid on time to avoid revocation and violation of terms.
5. Has Different Plans
Since mortgage values differ, life insurance comes with different packages and plans. The difference allows you to get full coverage and compensation that meets the exact value of your property. The insurer can analyse the value or use the mortgage plan to evaluate it. Companies also differ in terms, premiums and repayment rates and you should seek the most appropriate for you.