Term mortgage insurance.Who gets the house?

Question

Im thinking about getting mortgage insurance on my home. This is my first home and i dont have it mortgage insur. now. How much does term mortgage insur. normally run and who gets the house if i pass away or have an accident? Is it worth it?

Answer 1

In Australia, the phrase 'mortgage insurance' is an insurance for the bank, paid by the borrower. It is a one time payment. It is required by the borrower when the mortgage deposit is less than 10% of the loan. This 'mortgage insurance' is to protect the bank in the event of foreclosure that the property need to be sold off during a bad economy to recoup the mortgage. If the selling price is lower than the amount owed by the borrower, the insurer will pay the loss to the bank. Therefore, 'mortgage insurance' is not protecting the borrower, it is protecting the lender.

If you wish to protect your homew within your family from giving it to back to the lender in the event of your death, illness, or disability; you are looking for life insurance.

It is most definitely worth getting it because we do not know when we will die or sick. If we knew when, then it is pointless to buy life insurance!

Answer 2

Term mortgage insurance is life insurance where the amount goes down over time.  That is not good.  It is better to get level term life insurance that the amount stays the same.  

It is a regular life insurance policy where you name a beneficiary and that person gets the money.   They can do whatever they want with the money on either policy.   It is really not tied to the house.

So, get level term.   And write a Living Trust so everyone knows who you have leaving what to.  

Answer 3

arkrazback, Home insurance is actually very flexible. I don't understand all the fine print of my homeowners policy, but my homeowners insurance agent is always helpful. Try calling your agent or a homeowners agent in your area. http://www.easyhomeinsuranceguide.com They should be able to help you.

Answer 4

Term mortage insurance is basically just life insurance, where the payout goes to the mortgage company, and keeps getting smaller.  It's more expensive than straight term, where the payout goes to your spouse or estate, and doesn't keep getting smaller.

So if you want your house paid off if you die, buy regular, straight term insurance.  You'll have more coverage for less money.

Because it's life insurance, it's rated based on your age, health, weight, and coverage amount.  

Who gets the house?  Go look at your will.  YOU decide who gets your house, in your will.  Don't have one?  DO THAT FIRST.

Answer 5

There are two different types of Mortgage Insurance.

One is purchased through an Agency, Broker, or other outside source. This insurance pays a lump sum to a specified person or beneficiary in the event of death. To buy this type of insurance, you traditionally have to qualify for the policy through underwriting. This is generally the less expensive route if you are in pretty good health. There are some companies that offer special policies that are tied to proof of mortgage and offer fewer guidelines to make qualifying easier.

The other is purchased through the lender. This insurance pays the lending institute a set amount or the balance of the loan. This is an expensive way to pay off the debt because the premiums are proportionately higher that term or Mortgage term. However, if you have health issues that would prevent you from qualifying for traditional insurance, this may be the only option. If you have issues that cause your traditional life insurance premiums to be increased, this may be the better choice.

Depending on exactly which type of Mortgage Insurance you are referring to, a level term will usually be less expensive. If you would like a quote, go to my website and you will be able to get a quote, or contact me and I will run some quotes through different companies to give you an idea.

In the event of death, the house will go to whomever you chose or designate in your Will no matter which route you chose to insure the mortgage.

If the insurance is never used, people perceive it to be a waste. But if life insurance is ever used, the people who receive the benefit think it's the best and wisest purchase you ever made.

Answer 6

Everyone has provided good information here but don't rule out whole life insurance. Depending on your family situation its not always a bad option for a long term safety net. Check this site for a breakdown: http://www.whatiswholelifeinsurance.org

Answer 7

It's not worth it if you are single.

If you are an adult with no children, no one else is responsible for your debts if you die...they just die with you.

Alternative (and so much cheaper it's sickening):  Get life insurance through your employer.  You can usually get enough coverage to pay off your house for about $5 per month if you are young and healthy.

Have a parent get the benefit, pay off the mortgage (which stops the payments), and have them sell the home so they can get the equity too.

Susie Ormon doesn't even recommend it if you are single.

Answer 8

Decreasing term insurance for a mortgage is expensive. You would do a lot better getting level term insurance.  If you have a particular person in mind to leave the house to, the have that person be the owner of the policy.  That way it is not held up by probate.

An insurance agent that I knew years ago did his masters thesis on this very subject.  The level term insurance is much better to consider.

Answer 9

If it is "mortgage" or "creditor" insurance offered by the lending company (IE: the bank or whatever), do not get it. That stuff typically isn't regulated by insurance councils and they do their underwriting at the time of claim, which means you could pay into it for ever and when either of you dies you might not even get paid. The bank is more or less insuring that they get paid, either by you or the insurance company. Also, most lenders are not licensed to sell insurance and are very rarely even trained on the difference between different insurances.

Term insurance is a far superior product and I have NEVER seen a single comparison that shows creditor insurance being better than term. You have full control over what happens with it. They do the underwriting up front and you decide who gets the money so if that person doesn't want to put the money towards the debt, they can use it for something else, such as putting your kids through school or something.

Check out the sources below for videos and comparisons of cases where Mortgage insurance didn't pay out and how Term Life is better.

If that isn't enough for you google search something like "Term vs. Mortgage Insurance" or "term vs. creditor insurance" I will bet you anything you want that you won't find a legitimate article that says term is inferior to mortgage insurance.

Contact a licensed insurance broker (someone that has access to multiple companies) and they will shop around for the best Term insurance coverage for you.

Either way if you die or whatever your house goes to who ever you want it to go to (just make sure you've got a Will or something that indicates what you want to happen).  The main difference is who gets the money.  With term insurance, you decide who gets it.  With the stuff from thebanks, the bank gets the money...no exceptions.

About the whole life thing the other guy was talking about...don't look at whole life unless there are needs other than the mortgage or longer term things that you're looking to fill.  A mortgage is a temporary need that won't be there for ever and that's what Term insurance is for...temporary needs.  Being that you do now have assets, have a full financial needs analysis might not be a bad idea.

Answer 10

Mortgage Insurance is just a fancy name for Life Insurance.  The agent is trying to sell you life insurance to cover the amount of the mortgage in case you were to pass prematurely.  Their are different types of life insurance, but Term Life would be the cheapest.  So if you have a 30 year mortgage, look at getting a 30 Year Term Policy.  The cost depends on your age and health.  The younger and healthier, the cheaper it will be.  

Go to a few term life websites and get an instant quote.  I would check out Accuquote.com, Efinancial.com, or quickquote.com.