Mortgage Protection vs Decreasing Term Life Insurance
If you’ve ever purchased a home or refinanced one, you might have noticed a long stream of mortgage related mail arrive. The most common one is for “mortgage protection”. The last time I tried to purchase mortgage protection, I was confronted with decreasing life insurance. So what is the difference and which one should you choose.
Decreasing Life Insurance
Decreasing life insurance is typically used for mortgages. The reason why is because as you pay down your home, you’re owe less. There are many people that buy life insurance just to cover what they owe on their home. So if you have a 30 year mortgage, the death benefit would decrease in time.
Mortgage Protection
Mortgage protection comes in various styles. It’s somewhat a comprehensive package which not only covers life insurance, but disability as well. When it comes to insurance, the majority of Americans have car insurance, but how many people do you know actively seek out disability insurance? Statistics show that there is a 1 in 5 chance you’ll get into a car accident and that there is a 1 in 21 chance of becoming disabled.
Why Is Disability Insurance Important
Since people in general are more likely to become disabled, it’s crucial to carry this coverage. What will happen to your home if you become disabled? Who will pay for the mortgage? What will happen if you skip several mortgage payments? In most cases, you’ll lose your home. If you compare the cost of disability insurance to the cost of losing your home, I’m sure you’ll agree that you’d prefer to keep your home if a situation occurred.
More Options
Beside getting straight mortgage protection insurance, some people opt for a more comprehensive package. This includes a separate disability insurance policy and a life insurance policy. So in this case, you can even choose not to have decreasing life insurance. The truth of the matter is that the costs of having a home doesn’t decrease for many. Many people either move to another home or upgrade their standards of living. So the liabilities and assets increase in time. So it would seem more reasonable to have a growing life insurance policy than a decreasing one.