Mortgage Protection Insurance
The mortgage protection is a form of decreasing term assurance that repays outstanding balance on mortgage when in the case of death. Essentially, it eliminates the risk of your family losing its home in the event that you pass on before your home mortgage is paid off.
However, the mortgage protection is not a substitute for the primary responsibility of the borrower to repay his credit facility when alive and the benefits of mortgage protection are paid directly to the mortgage institution (that is the lender).
How it works?
The premium for the mortgage protection is calculated according to the amount of your mortgage and the interest rate that is applicable to your home loan.
There could be an option of extending its cover to a situation in case you contract some certain illnesses or in case you become permanently disabled due to an accident, however, this will incur an additional cost. Many times, this cover is required by mortgage lenders before they go ahead to make a home loan.
Payouts for mortgage life insurance can be either declining-term which means the payout drops as the mortgage balance reduces or level, however, the level payments costs more. The recipient of the payments can be either the lender or the heirs of the borrower, depending on the terms of the policy.