Due to the increasing expansion of the mortgage industry and the use of it by users to buy or improve a home, the importance of knowledge and awareness about the benefits of using borrowers’ life insurance has increased. Most borrowers do not know the difference between traditional life insurance and mortgage life insurance.
That is why it is essential to use the life insurance advice of a specialist life insurance broker. Because borrowers can be informed of the benefits and limitations of mortgage life insurance and choose the best options according to their needs and conditions. This type of insurance has many complexities, and borrowers should use the life insurance advice of a life insurance broker.
Mortgage life insurance and traditional life insurance are similar in many ways and have similar functions. But in this article, we are going to talk about this agreement in more detail.
The Importance of Mortgage Life Insurance
When people borrow from banks or credit institutions to buy or build a home or meet their living needs, the borrower and the lender are usually worried about what will happen if the borrower dies and what the survivors will do.
Insurance companies, in the form of mortgage life insurance and to solve problems and such concerns, pay the remaining instalments in case of death of the insured (borrower) during the insurance period (mortgage). Insurance companies pay the rest of the mortgage instalments from the date of death until the end of the mortgage period together in the name of the bank or the lending institution (insurer).
Therefore, credit institutions or banks sell the life insurance of the mortgage to the borrower to repay the mortgage given to persons to their fund and avoid debt settlement problems for the survivors.
However, life insurance mortgages can also have additional coverage, such as a capital increase in death and exemption from insurance premiums and permanent disability. Therefore, considering the nature of life insurance and using life insurance consulting in all evaluation stages, comparison and selection of products and the insurance company are very important. Because the amount of premiums and conditions of using this type of insurance have many complexities, therefore, in this regard, it is recommended to use the advice of a life insurance broker to consider the various variables affecting this insurance policy to get the most out of the benefits of this type of insurance.
Mortgage Life Insurance Benefits
There are several benefits to life insurance for a mortgage, including:
- Facilitate the payment of mortgages by banks and financial institutions
- Resolve the concerns of the borrower and lender about his sudden death and bank debts
- Provide peace and comfort for the deceased survivors
- In harmony with the economic and livelihood structure of society
Differences between Mortgage Life Insurance and Traditional Life Insurance
Like traditional life insurance, the other too reduces the survivors’ worries about the financial consequences of the insured’s death. After the insured person’s death, traditional life insurance will get the benefits of premiums paid and investments made by insurance companies and will benefit from the resulting areas. In mortgage life insurance, the survivors will no longer have to worry about repaying the remaining instalments of the insured person’s mortgage, and the insurance companies will undertake to repay the mortgage instalment.
Despite the many similarities between traditional life insurance and mortgage life insurance, there are several differences between the two, which are noted below:
- Period – The period of the mortgage life insurance is limited to the repayment period of the mortgage instalments, and the mortgage life insurance will not have any benefits for the survivors after repaying the mortgage instalments. In other words, the mortgage life insurance benefits are depreciated after each period of mortgage repayment.
- Income – In traditional life insurance, the benefits of premiums paid and investments made are awarded to survivors after the insured’s death. However, in the other one, the insurance company pays the remaining unpaid instalments after the insured person’s death.
- How to calculate the premium – traditional life insurance premium is determined based on the premium paid by the insured to the insurer and their life span. But the mortgage life insurance premium is calculated based on the amount of the mortgage, the borrower’s age, and the repayment period of the mortgage.
- Insurance Coverage – In traditional life insurance, survivors benefit from premium benefits. But, in mortgage life insurance, if the insured person dies or becomes disabled during the mortgage repayment period, the survivors will no longer have to worry about repaying the remaining mortgage instalments.
- How to pay – The premium in traditional life insurance is paid monthly or annually and periodically to the insurance company’s account. But the life insurance premium of the mortgage is paid in one lump sum by the borrower.
- Other differences
- Depending on the type of mortgage, the borrower’s age, and the repayment period of the mortgages, the insurance company considers different rates and conditions for the life insurance of the mortgage. The need to review and evaluate them is critical. But, some insurance companies set limits on the life insurance life plan, while others put a specific limit on mortgages.
- However, some insurance companies only undertake to repay the instalments related to the mortgage principal and do not guarantee interest and repayment of the mortgage. However, others also undertake to repay the principal and interest of the mortgage. This also applies to deferred instalments and their late payment fines. Especially in the case of long-term mortgages, the use of life insurance broker advice is essential.
- If the borrower settles the mortgage earlier, he can request the termination of the insurance policy and based on this, the insurance company calculates the returned insurance premium and pays it to the borrower. However, some insurance companies do not accept these conditions and impose restrictions in this regard. For this reason, it is recommended that borrowers use the services of life insurance brokers to make the most of the benefits of these insurances.
The Importance of Using Life Insurance Advice
Given the differences mentioned above and the complexities of mortgage life insurance in terms of the period, benefits, how to calculate premiums, insurance coverage rates, payment methods, and restrictions imposed by insurance companies and mortgages, the use of expert advice of a life insurance broker is essential.
It is essential to ensure your family members are protected in the event of a catastrophe affecting you. Life insurance or life cover is exactly what it says – it provides an amount in one lump amount to your dependents in the event that you pass away during the period of the insurance policy. Life insurance is typically purchased simultaneously with mortgage to ensure that you can be sure that it’s paid back. AWS Financial Services has plenty of knowledge in arranging life insurance for its clients. AWS Financial Services has access to the majority of insurance providers available and are able to provide the best coverage to meet your needs with competitive rates.
AWS Mortgage expert advisors have sufficient experience in terms of rates, conditions of insurance companies and lenders. They can give you the best life insurance advice. Using the guidance of AWS Mortgage advisors, you can choose the best option from the available options. AWS Mortgage specialist advisors will help you take advantage of this type of insurance according to the needs and conditions of the mortgage and the rates and conditions announced by the insurance company.