We are constantly recording how important it is to have life insurance and in most cases, not having enough knowledge of the subject, we take the first option offered to us in the market, but you should know that there are other types of life insurance, which can benefit you even more, one of them is mortgage life insurance.
Now you may be wondering, what is it? Why is mortgage life insurance better compared to conventional? This is why we created this article with all the information you need so you can make the best decision.
What is Mortgage Life Insurance?
Well, to clarify concepts, we will begin by mentioning that life insurance is designed as an excellent way of saving and protecting loved ones, relatives or relatives, in the event of the death of the insured. With this clear, now we do answer the question: What is mortgage life insurance?
Mortgage life insurance is a policy that guarantees payment of the mortgage on your property in the event that the insured person or persons (it can also be subscribed jointly by the two spouses) die or end up in a situation of disability. This in order to guarantee the payment of the debt and support the beneficiaries.
In most cases, banks force users who are applying for a mortgage to purchase mortgage life insurance in order to be able to support the debt in the event of death.
What are the Differences between life insurance and mortgage life insurance?
- It is in charge of financially indemnifying the family or beneficiaries of the insured so that they continue with their lifestyle in case of disappearance or absolute disability.
- You can choose the financial amount you want to insure.
- You can choose the beneficiaries and percentages with which each one will be compensated.
- The premium is established in the contract and does not present variations.
Mortgage life insurance
- It is responsible for paying the mortgage loan or other types of credit, in the event of the death or incapacity of the insured so that the debt does not fall on his family.
- The insured amount will be associated with the debt you have with the bank.
- The main beneficiary is the bank, unless there is money left over and it must be delivered to the person of your choice.
- The premium will decrease as the debt goes down with the payments.
What advantages does mortgage life insurance give me compared to other life insurance?
- Financial Security: The main advantage is that it allows you to pay the entire mortgage and guarantees financial peace of mind for family members in the event of any calamity. In this way, you will be able to protect the stability of your family in the future, since your coverage will take care of all the outstanding payments related to the mortgage.
- Easy application: In this case, you will not be asked for medical exams, nor will they conduct surveys related to your lifestyle or age, which makes the qualification process very practical and fast.
- Coverage in the event of disability or terminal illness: Many of the mortgage life policies have coverage to indemnify the insured in the event of becoming permanently disabled or suffering from a terminal illness. This should be reviewed in detail with your insurance company to determine if it is covered.
What disadvantages does mortgage life insurance give me compared to other life insurance?
- Decreasing indemnity amount: Compared to conventional life insurance, mortgage life insurance will reduce its insured value over time and to the extent that the premiums are paid.
- The beneficiary is the bank: As we said before, the main beneficiary in case of death or calamity is the bank, so that the relatives will not obtain any compensation, unless, after paying off the debt, money must be delivered to the person designated by the insured.
What does mortgage life insurance cover?
For the most part, mortgage life insurance covers the death and also the disability of the insured in the event of an accident or illness that prevents the insured person from continuing with his professional life.
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If the insured person suffers any of these calamities set out in the contract, the rest of the family would be free of the economic burdens derived from the payment of mortgage installments. Therefore, the insurance company will assume the payment of the outstanding capital of the loan and the house would be free of the mortgage, removing a concern from the family nucleus.
Should life insurance be taken out when signing the mortgage?
If the time of the mortgage to finance a house is for a prolonged period of time, it would be convenient for you to take out mortgage life insurance, because as we always say, it is better to be safe than sorry.
Types of life insurance linked to mortgages:
- Life Insurance with a constant insured capital: In this, the same amount will always remain insured. The money is mostly used to pay off the mortgage debt and, if there were to be money left over, it would be shared with the beneficiaries.
- Life Insurance with a decreasing capital: The capital that is insured is accommodated to the pending capital according to the interest rate you have selected.