NEW HAMPSHIRE HOME INSURANCE

Mortgage life insurance is the term that is usually given to life policies that are specifically taken out to cover the repayment of a mortgage in the event of death or critical illness.

Neither of the above two scenarios are ones any of us wish to think about, but it is a sad fact of life that the unfortunate can happen. Wondering how they are going to pay the mortgage back, is the last thing you would want a loved one to have to worry about at an such emotional time of life.

This is where mortgage life insurance policies come in. They are also known as decreasing term assurance policies and run in parallel with your mortgage. As the capital amount that you owe on the mortgage decreases with time, so does the level of life cover provided by the policy, in the event of a pay-out.

The above type of policy is designed to work with a repayment mortgage, because with this type of mortgage you are paying off the interest and capital with your monthly payment. However, if you have an interest only mortgage, which are becoming all the more popular, the amount of capital repayment will remain static throughout the term of your mortgage, because you will only be paying back the interest.

Whilst the professional advisor who you arranged your mortgage with should have advised you to take out a suitable investment product to act as a repayment vehicle (which will basically mature and clear the loan at the end of the term), such a product would not necessarily provide you with the protection you need should the unfortunate happen during the mortgage term.

In this instance, a level term life insurance policy would be more suitable. This essentially means that the amount of payout that would be made, should you die, during the policy term would remain the same from day one to the last day of the policy.

Once you’ve established which type of policy is for you, the next decision is whose lives you wish the policy to cover. Polices can be taken out to cover single or joint lives. The premium you will pay will be dependent on the cover you choose and as you would expect the more lives you cover, the more you will pay. You will also need to state, at the outset, whether you wish the policy to payout in the event of a single death or joint death.