Coverage in the Event of Your Death
This type of coverage is the basis for most mortgage life insurance policies. The loss of a loved one is a painful event, and shouldn’t be compounded by financial hardship or difficult decisions such as whether to pay off the mortgage or the credit cards. In the event of your death, mortgage life insurance will pay off the remaining balance of your mortgage ensuring that your family members have a roof over their heads. Mortgage insurance helps your family not only by paying off your loan, but also by simplifying the decisions that need to be made if you pass. Since this money is earmarked for your mortgage only, you won’t have to worry that the insurance money may go elsewhere or may sit unused while your family grieves.
Coverage in the Event of Illness or Temporary Disability
In the event that you are too sick or injured to work for more than four weeks, your mortgage life insurance can take over your monthly mortgage payments. This option is called repayment coverage, and generally lasts anywhere from one year to two years depending on your plan. In an economy when many households are operating paycheck to paycheck, this form of coverage can be invaluable. Since injury and disability generally come with a hefty medical cost themselves, not having to worry about your mortgage too can significantly alleviate some of the financial stress.
Coverage In the Event of Traumatic Events
If a traumatic event occurs and adversely affects your ability to meet your financial obligations, trauma coverage can pay a lump sum into your mortgage loan amount to act as a buffer. This safety net can be of vital importance during times in which your health and safety are your first priority. Trauma coverage is the rarest type of mortgage life insurance, and is normally found in military households or those with higher than average risk factors. The amount that trauma coverage will pay out will depend on the type of plan. Trauma coverage can work in tandem with repayment coverage to help you get back on your feet after a particularly unsettling and damaging event.
While other types of life insurance or disability insurance may be more versatile, mortgage life insurance serves a specific purpose at a reasonably low cost. With mortgage life insurance, you trade a small premium for the knowledge that you will never leave your family without a home. Mortgage life insurance is best used in conjunction with a more general life insurance policy, but is also an excellent standalone product for those with concerns about their family’s future wellbeing. This insurance product can become even more useful by taking options such as repayment coverage and trauma coverage.
