Protect your Mortgage

Posted: November 25, 2010 in General Information, Mortgages
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Do you have your mortgage protected in the event of your untimely death, critical illness or disability?
Here is a good example of the choices you face: Marissa and Marcello, both 25 and just married, bought a condo together.
Now they need a 20-year mortgage for $100,000. Marcello is still in school, so they depend on Marissa’s income to pay the bills right now.
Although she is in excellent health, they decide to insure the Mortgage in case something happens to her. How much will it cost?

Marissa and Marcello look into two options:
Option #1 Mortgage life insurance on the loan from the bank that holds their mortgage.
Here’s what they find if they get: The death benefit today is $100,000
Death benefit when they pay off the mortgage will be $0
Monthly premiums $9
Total spent over 20 years $2,160 – $2,380

Option #2 A 25-year term life insurance policy for Marissa.
The death benefit today is $100,000
Death benefit when they pay off the mortgage will be $100,000
Monthly premiums $8
Total spent over 20 years $1,880 – $2,070

Marissa and Marcello decide: They take the term life insurance for Marissa for a number of reasons:
• The term life premiums are lower because of Marissa’s age and the fact that she is a non-smoker. The mortgage life insurance, on the other hand, costs the same for everyone.
• The mortgage life insurance will end in 20 years, when they pay off the loan. With the term life insurance, they get an extra five years of coverage.
• A big benefit of the Term life insurance is they can always convert to permanent insurance.

Lesson learned: This does not mean that everyone would be better off buying term life insurance to cover their loans. It depends on many factors, such as age, state of health, personal situation, and the length of time the insurance is needed. Life insurance is only one aspect of the coverage you should be looking after when it comes to protecting your mortgage.
You have 62% of contracting one of the 31 critically illness (i.e. Cancer, heart attack, stroke) covered by Critical Illness insurance.

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