Mortgage Term Life Insurance Types

See Which Mortgage Term Policy Suits You?

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One type of life insurance that most homeowners should buy is mortgage term life insurance. There are really two types. Here is how they work.

• Decreasing Term Insurance

  The first type, and most popular type, of mortgage term insurance is known as decreasing term life insurance. The face amount, death benefit, of this policy decreases as the balance owed on your mortgage decreases.

  Upon the death of the homeowner the mortgage is completely paid off. The premium is level throughout. This is very inexpensive life insurance.

• Level Term Insurance

  Level term life insurance is sometimes used as mortgage life insurance. It accomplishes the same thing as the decreasing term policy but depending on the time of death more cash is provided for the beneficiaries.

  Let us suppose the homeowner dies within the first year of owning his level term mortgage life insurance policy the mortgage is paid off and that is it. If, however, the homeowner dies in the fifth year though the mortgage would be paid off but there would be some additional cash to go to the beneficiary of the policy.

  If the person dies in the tenth year there would be even more extra cash. You see, this policy remains level, the death benefit never decreases. There is therefore more cash to be paid out as time passes. The mortgage balance decreases but the policy death benefit stays the same.

  The premium for this type of term policy is more than that of the decreasing term life policy. Some buyers think it is worth the extra cash outlay.

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