 Sam
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Joined: 21 May 2005
Posts: 281
Location: CALIFORNIA
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 Posted: Sat Apr 03, 2004 3:11 am Post subject: Mortgage Life Insurance |
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Mortgage Life Insurance is a type of term life insurance often bought by mortgagors. It is a policy in which all or a portion of mortgage balance (subject to individual policy coverage limits) is automatically paid off by insurance proceeds, if the borrower dies while the policy is in force. The amount of coverage decreases as the principal balance declines.
Some policies also cover the borrower in the event of disability. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. The intent is to protect survivors from losing their homes. Your cost of insurance is based on your age when you apply and the amount of your mortgage.
For example, Mack and his wife Jessica took a mortgage of $400,000 from Carole at 4% interest rate for 5 years by securing their house. In the 4th year, John was diagnosed with cancer and in the same year he died. The remaining principal balance on their mortgage was $100,000. When they bought their home, they also purchased mortgage life insurance. At Johns death, entire balance of $100,000 of the mortgage was paid off by the 'mortgage life insurance' which helped Jessica to retain the ownership of their house.
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