What is life insurance on a mortgage?
Mortgage protection insurance is a type of insurance policy designed to help cover your mortgage repayments. The primary purpose of mortgage life insurance is to ensure that your mortgage is paid off in the event of your death, critical illness, or total and permanent disability.
What are the types of home loan insurance?
- Life Insurance: Pays a lump sum to your beneficiaries if you pass away.
- Total and Permanent Disability (TPD) Insurance: Pays a lump sum if you become totally and permanently disabled.
- Trauma Insurance: Provides a lump sum if you are diagnosed with a specified critical illness (e.g., cancer, heart attack).
- Income Protection Insurance: Pays a percentage of your income if you are unable to work due to illness or injury.
Who are the beneficiaries of lenders mortgage insurance?
The payout from a mortgage life insurance policy can be used by your beneficiaries to pay off the outstanding mortgage balance, ensuring they can keep the family home without financial strain.
How do I choose the lender mortgage insurance policy?
You can choose a standalone mortgage protection insurance policy or add mortgage coverage as a rider to an existing life insurance policy.
The coverage amount should be sufficient to pay off your outstanding mortgage balance and any other associated costs. The term of the policy typically matches the term of your mortgage, ensuring coverage lasts until the mortgage is paid off.
Home loan calculations for 20 years (example)
| Amount, $ | Rate, % | Accrued %, $ |
| 100,000 | 5.15% | 51,929 |
| 100,000 | 5.25% | 52,938 |
| 100,000 | 5.35% | 53,946 |
| 150,000 | 5.45% | 82,431 |
| 150,000 | 5.55% | 83,944 |
| 150,000 | 5.65% | 85,456 |
| 200,000 | 5.75% | 115,958 |
| 200,000 | 5.85% | 117,975 |
| 200,000 | 5.95% | 119,992 |
| 250,000 | 6.05% | 152,510 |
| 250,000 | 6.15% | 155,031 |
| 250,000 | 6.25% | 157,552 |
How do I apply for the Mortgage Life Insurance?
At first you should calculate the outstanding balance of your mortgage and consider other debts and expenses to determine the appropriate coverage amount. Then shop around and compare policies from different insurers to find the best coverage and premium rates.
You may need to undergo a medical assessment or provide health information as part of the application process. Carefully review the terms and conditions of the policy before purchasing to ensure it meets your needs.
