Mortgage Term Life Insurance
Life insurance was designed with the protection of the family first and foremost in the minds of it's creators. I believe it was fraternities who first explored the idea because they saw the difficulties that families experienced when a wage earning parent died. They figured that if a group of people got together and contributed to a fund over a period of time that money could be used, at minimum, to cover burial cost of the deceased and much pressure would be taken off the shoulders of the surviving family. At some point later someone came up with the idea to have mortgages paid off in the event of the death of a breadwinner. Let us look at how mortgage life insurance works and in particular mortgage term life insurance. The Premium
As the name mortgage term life insurance implies this is very inexpensive life insurance. Term is the cheapest type of life insurance. This is close to the purest type of term insurance that exists. The premium of this policy remains level throughout. The mechanics are best illustrated by detailing an example...
Let us suppose you bought a house for $200,000. You have good credit and a good job so you decide to make a down payment of $40,000...20%. You owe $160,000 which you intend to pay off over a 20 year period. The amount you pay each month will depend on the rate of interest the bank charges but for the sake of this illustration that is beside the point.
In the initial years the majority of your payment is going to interest. As the years go by, and the principal decreases, a larger portion of your payment actually goes to reduce the amount owed to the bank or mortgage company.
In the initial years the life insurance company is bearing greater risk. The natural thought is that you should be paying a higher premium for your policy at the beginning. Not so. What the actuaries have done is to calculate the cost for the risk the insurance company is bearing, each year, for the 20 year period. They charge you an average, thereby allowing for a level premium over the 20 year period. Calculating the premium is a little more complex than that but, in a nutshell, that is how it works.
The Death Benefit
Bear in mind that your mortgage term life insurance policy was intended to pay off your mortgage in the event of your death. That is exactly what it will do. The death benefit of the policy decreases each year; thus the popular name for this policy...decreasing term insurance. The amount paid by the insurance company upon the death of the insured is equal to, or close to, the amount owed to the bank or mortgage company...
Let us use the same $160,000 mortgage as an example. If the insured died within the first year the amount paid would be equal to the amount owed at that time...$160,000. If the homeowner died in the tenth year the amount paid by the insurance company would also be equal to the amount owed but that amount at that time would be much less. I guess something close to $100,000. You would need to look at mortgage tables, and consider the interest rate, to arrive at an accurate figure...
The beauty of the whole thing is that the survivors will have a house free and clear. For additional information on mortgage term life insurance go to: http://www.lifeinsurancehub.net/mortgage-insurance.html
Related Tags: term life, term insurance, mortgage term life insurance, mortgage life insurance, mortgage insurance
For more than 40 years Donald has been known for his extensive knowledge of the life insurance business. He has represented some of the largest and most admired life insurance companies in the United States as well as Canada. His advice is invaluable.
Donald's website is: http://www.lifeinsurancehub.net
Your Article Search Directory : Find in ArticlesRecent articles in this category:
- How to Protect your Home and Family with Mortgage Life Insurance
Paying off a mortgage can be a struggle, even for families with two incomes. If you or your partner - The Advantages of Whole Life Insurance
Whole life insurance is a type of insurance policy that, like term life insurance, pays out upon the - Affordable Life Insurance - Why You Can't Beat The Internet Advantage
If you want to get affordable life insurance fast, then you really have one option -- the internet. - Life Insurance Settlements - What You Need To Know On How To File A Claim
For anyone who has lost a loved one, filing a claim for life insurance settlements is not something - Do I Need Critical Illness Insurance?
Critical illness insurance is taken out to cover you either for life or for a set period of time aga - How to Get the Best Rates on Life Insurance in Pennsylvania
Most people never consider that there are actually things they can do that will help them save money - How to Find the Best Rates on Life Insurance in Tennessee
If you aren't looking for free online life insurance quotes in Tennessee, you should be! The online - The Four Types of Term Life Insurance
At first blush, term life insurance seems as though it would refer to just one type of insurance pol - Life Settlements
Exchange Your Life Insurance Policy for a Life SettlementLife insurance policies are taken with cert - How to Buy Whole Life Insurance Online
Buying whole life insurance online is similar to buying any other kind of insurance online. If you'v
Most viewed articles in this category:
- Life Insurance - The Two Types Of Whole Life Insurance Explained
Life insurance is a topic that's incredibly confusing for many people. There are many terms and prov - What Exactly Is a Term Life Insurance?
The two most common forms of life insurance policies are term life insurance and whole life insuranc - The Amazing Story of Life Insurance Settlements and Whether or Not They Are Right For You
Life insurance settlements are a relatively new twist by the life insurance industry as a way to add - Keyman, Keywoman, or Keyperson Life Insurance: It's Vitally Important To Your Family & Your Business
Key man life insurance, or as it is more politically correctly known, key person life insurance can - Term Life Insurance Explanation
Brief term life insurance explanation. Life insurance companies offer two basic types of policies... - Is Life Insurance Cost An Important Consideration For You?
Life Insurance cost. When we search for life insurance the cost of the policy is important for most - Providing The Right Fit With Whole Life Insurance
An initial search of whole life insurance on today's leading search engines reveals a rather negativ - Get the Best Insurance Policies using Online Term Life Insurance Quote
Did you know that you could apply for an insurance policy sitting at home from your own computer? We - Get Protected: Shattered Dreams Caused By Life Insurance Complacency
Margaret Donaldson sat in the living room of her smart 3 bedroom home near Fulham Road in London. He - Whole Life-Permanent Life Insurance
Whole life insurance pays a death benefit when you die, there is no specific term. Whether you die i