If you have recently purchased a home, then there is a good chance that your mortgage company and homeowner’s insurance carrier have mentioned a life insurance policy in connection to that new loan. Mortgage companies recommend life insurance policies so that you can ensure that your family is well protected in the unfortunate event of you or your spouse’s death.

Protecting Your Family

Life insurance policies for mortgages are a means of protection in case the worst happens. A death in the family can have a big enough impact on everyone’s lives without the added concern that the home might be lost as well. The financial burden of paying for funeral fees, as well as a swift loss in household income has led more than a few families into a loan default and foreclosure.

A life insurance policy can prevent this scenario from occurring and protect your loved ones in their time of need.

Types of Life Insurance for Mortgages

When it comes to deciding on the best mortgage life insurance policy, you have many options to choose from. Let’s take a look at the life insurance policies tied directly to a mortgage, as well as a general life insurance plan that will cover a mortgage, in addition to other expenses and life events.

•Decreasing Term Insurance

With decreasing term life insurance for your mortgage the policy and cost of that coverage decrease as your loan is paid down each year. As your principal declines due to your monthly mortgage payments, the amount that needs to be insured is lessened, which means that your policy will become less expensive over time. This can be perfect for those with traditional 30 year mortgages.

•Level Term Insurance

Some mortgages are interest only, which means that the principal loan amount is not paid down in the monthly mortgage payments. With these types of mortgages, a level term life insurance policy works perfectly because the loan principal and insurance coverage are fixed. You have the peace of mind knowing your family is covered if an accident or illness occurs.

•General Life Insurance Policy

Another way to cover your mortgage in case of your death is through your traditional life insurance policy. When this is done the mortgage is but one aspect that is considered when judging the amount of coverage needed. For example, the life insurance policy can include the mortgage payoff amount, funeral fees, other debt payoffs, future college tuition fees, and one or more years of the policy holders expected income. This ensures that all major expenses are covered. In addition, it eases the remaining family member’s financial transition during a difficult time.

To get the best understanding as to which of these policies is best for you, contact an insurance specialist to get specific recommendations on your personal mortgage and life insurance needs.