Why You Should Obtain Life Insurance On Your Mortgage
Homeowners will quickly find out that in order to obtain finance, they will be required to have life insurance. This is for the purposes of repaying the loan back in the event of the homeowner passing away. Past policies were known as decreasing term insurance, this meant that as the value of the loan decreased, so did the value of the life insurance.
Nowadays a level term policy seems to be more favored. This is where the insurance amount is the same, as the loan amount and it stay constant throughout the term of the policy and equal to the initial loan amount. There is an option where the premiums can be returned after the mortgage has been paid up. There is no tax payable on the money that the policyholder gets back.
You can buy one of many different benefit policies available for different periods such as twenty years, twenty-five years and thirty years. The premium will be guaranteed for the loan duration and the policy amount will not decrease. Some agents and banks still sell the traditional mortgage protection. Now its preferred that the home owner rather get a policy in which the loan value does not decrease and where the policyholders rate is guaranteed to be the same for a period of time.
Purchasing this type of policy is quite simple as many sources offer it. As part of your mortgage application, you will be offered the option to be provided with cover. It will then automatically be included in your new mortgage with the lending institution.
If the client has doubts, the bond originator can refer the client to an agent who deals with insurance who would be able to discuss different covers and options clearly. They would normally assess the clients circumstances and they can help by selecting the policy that would be most suited to the client. These policies can be cheaper than those directly offered by the lending companies.
Premiums may be paid monthly, bi-annually or once a year. Paying once a year will save you a fortune in monthly administration fees. On some policies, the premium rises as you age. If you are older than fifty-five, you should request a fixed rate policy. This will keep the premium the same for a number of years.
You should also ask the agent if the amount of cover would stay the same. Another important thing to ascertain is whether you may cancel the policy at any time. It is important that you select the type of life insurance policy on your home loan.
by: Mathew Merola