Mortgage Insurance vs. Life Insurance: What’s the Difference?
You got through the mortgage qualifications, searched high and low in a crazy market for a house and are ready to sign the dotted line for a mortgage on your home-sweet-home. Then the words “mortgage insurance” are brought up.
What is Mortgage Insurance?
Mortgage insurance is simply a term life insurance policy that exists for the length of your mortgage and covers the amount of your mortgage. This means that you don’t have to buy something that is called mortgage insurance to cover your mortgage. You can simply get a term life insurance policy with the value you need for the death benefit. So if you have a 30 year mortgage for $500,000, you get a life insurance policy that lasts 30 years and covers $500,000.
Often when it’s named “Mortgage Insurance” the death benefit decreases over time so that as you pay off your mortgage, the amount your family receives upon your death will decrease as the mortgage decreases. This often is not a good idea because in the event of your death, why would you want your family to receive LESS when they don’t have to? You need a life insurance policy that is going to work for all of your needs, not just your mortgage.
If You Already Have Life Insurance
If you have already purchased a life insurance policy when you buy your first home, it’s important to take a look at how much coverage you have and how much the home purchase increases your coverage needs. You can either modify your existing policy, or add an additional one.
How Much Life Insurance Do You Need?
You are going to need at least enough to cover your mortgage in the event that you die before it’s paid off, but if you’ve got other debt or want to take care of your loved ones financially when you pass, you’ll need more! Policies are not a one-size-fits-all. Depending on your age, your financial situation, other policies you may already have in place, we will provide you with different customized options. Come see your financial advisor at MOOLA to talk about what works best for you!