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Wendy Said:

How does one find out if there is Mortgage Life Insurance on a house?

We Answered:

The mortgage company that holds the mortgage on the house may or may not be able to help - my guess is most likely not. Mortgage life insurance is a form of decreasing term life insurance, tied to the amount of the mortgage. The policy could have been written by any company that writes life insurance.

I would suggest that you start with the individual who was handling the divorce for the husband (attorney??), or check with the individual who is named as the personal representative in the husband's will. Next I'd check with the regular insurance agent, if the two had one. If that doesn't bear any fruit, start looking at the checks written in the past, maybe that will give some ideas of the name of the company.

Good luck.

Samuel Said:

What level of cover needed for mortgage life insurance?

We Answered:

If you want to have life insurance to cover your mortgage, you only need to cover the mortgage capital, not the interest, because if you die during the term of the mortgage/policy, the future interest won't have been charged.

Typically, if you have an interest-only mortgage (where you are only paying interest each month, and not repaying the capital) you should look for a Level Term Assurance policy. The sum assured stays constant and the term matches your mortgage term.

If you have a repayment mortgage (where you are paying interest and repaying capital each month) you should look for a Decreasing Term Assurance policy. The sum assured will aim to decrease at the same rate as your mortgage capital so that if you die, the lump sum payable will be the same as the balance of mortgage debt at that time. Go for a product that guarantees to be enough to repay the mortgage or use a much higher interest rate than your mortgage is ever likely to charge - it is standard for advisers to assume a rate of 10%.

The premiums for a LTA policy will be higher than for a DTA, because the insurer is always on risk for the same amount, rather than a decreasing sum assured.

Usually, on either contract, the premiums will be guaranteed and fixed for the entire term. The poster from the US who said that DTA is a "rip-off" because you are paying a fixed premium for a decreasing sum assured, is wrong. The fixed premium represents tha average cost of providing the sum assured throughout the entire term of the policy.

Additionally, you can also include cover in case you are diagnosed with a critical illness during the term of the mortgage i.e. the sum assured is paid out if you die or suffer a critical illness, whichever happens first. It obviously increases the cost, but it's worth it, particularly given the increasing rates of cancer, stroke and heart attack. Those who don't understand critical illness cover will probably bang on about how it's no good, expensive and insurers don't pay out any claims. They are wrong. But you DO need to be aware that what you might consider to be a 'critical' illness, might not be the same as the insurer's view. They will only cover a defined list of conditions which will also state the severity or degree that you have to suffer in order to make a successful claim. Insurers have refused claims in the past mainly because applicants failed to disclose that they have, for example, suffered a heart attack in the past or because people have claimed for conditions that aren't covered. The Association of British Insurers (ABI) have recently standardised the conditions that are covered and most companies now, not only meet those conditions, but strive to exceed them in order to make their products more attractive to consumers.

There is no need to build-in additional cover as has been suggested. Just pay for what you need. If you want more life insurance to protect the family, then consider additional cover to suit that purpose - don't lump it into a mortgage protection policy. A Family Income Benefit policy, usually written in trust, is excellent and cheap. It's a form of DTA that pays a monthly income for however long you have the cover for (commonly for the time that children will be fiancially dependant).

Get some good advice from an independent financial advisor (NOT your bank, the mortgage lender or the estate agent - they are tied to their own products or estate agent advisers will usually have a small panel to choose from). A good advisor will run through all the options and choices with you.

If you don't know an IFA through a friend, family member or colleague try a couple of the sites I've shown below.

Good luck.

Emma Said:

What are the pros and cons of buying Mortgage Life Insurance?

We Answered:

One of your other answerers has "Mortgage Life Insurance" (known in the industry as "Optional Insurance") mixed up with "Mortgage Insurance" (which protects the LENDER -- not the Borrower -- in case the Borrower defaults on the mortgage). NO ONE requires a borrower to carry any form of Life Insurance (regardless of how high the Loan to Value ratio (LTV) is on the loan). However, Mortgage Insurance IS required if the LTV is greater than 80%.

That being said...

In the mortgage industry, Optional Insurance is thought to be a rip-off. If you have any sort of Life Insurance, then your beneficiaries will receive a ton of money if you die. If they choose to pay off the mortgage with that extra cash, nothing is stopping them. If they wish to buy a new house or open a new business (and leave the mortgage balance as it is), then they would have those options as well.

I recommend against Mortgage Life Insurance (Optional Insurance). You can get a better deal on a regular Life Insurance policy that will accomplish the same objectives and offer your beneficiaries more flexibility.

Hope that helps.

Good luck!

Clyde Said:

Are there any type of mortgages where I can use my life insurance as collateral?, Pay interest only till death

We Answered:

This is a very interesting question.

A mortgage loan is secured by the property, and a lien will be on the property from the mortgage company, if you made the bank your beneficiary on your whole life insurance policy to guarantee full payment of the mortgage at your death, meanwhile you pay interest only to the mortgage company until your death??? Your heirs would own the house at your death because the mortgage is paid in full.

I don't know if that is practiced. You could certainly present it to a local mortgage company and let them review your offer. Most banks offer term life mortgage insurance that pays off your mortgage at your death. Term meaning the death benefit decreases on the life insurance policy as you make principle payment on the mortgage, the mortgage company is the beneficary and these premiums are added to your mortgage. Your heirs would own the house at your death because the mortgage is paid.

If I were the mortgage company I would be concerned that at anytime you did not make your whole life insurance premium this mortgage agreement would be null and void. Also, Privacy laws can prevent your mortgage company from knowing if you the owner of the whole life insurance policy changed beneficiaries. Even if your whole life insurance policy was a "paid up for life" type and you were fully vested, it still does not stop you from changing the beneficary at anytime. Yet, honestly why couldn't the whole life insurance policy be secured legally the same way a term life mortgage policy is secured in that the bank manages the policy?

If your whole life insurace policy has equity, you might be able to borrow against your policy, apply the proceeds towards your mortgage to decrease the principle mortgage. You would have to read your whole life insurance policy to see what the terms and conditions are for borrowing against equity in your policy. They may assess an interest fee for borrowing, but I've known of policies that if the fee's are not paid it would merely decrease the death benefit upon your death.

The method behind your question is worth reviewing.

Toni Said:

How would i go about finding a deed and seeing if there is mortgage life insurance?

We Answered:

The deed won't help you. It has nothing to do with mortgage life insurance. Check his bank records from the time he bought the house until he died. He would have had to pay a premium at least annually to keep the policy in effect.

If you need the deed for some other reason, you can probably access it online and print off a copy. If not, your county recorder will give you a copy for a modest fee.

Ramon Said:

Is it better (for homeowners) to buy Life Insurance instead of Mortgage Insurance when taking out a mortgage?

We Answered:

Mortgage insurnance (AKA Creditor insurance) is a terrible product. It's been proven time and time again that purchasing individual term life insurance beats creditor insurance hands down everry time.

Here are a couple of the key points:

As you mentioned the coverage declines since you are only covering the balance. However the cost of the insurance doesn't! Creditor insurance gradually gets more and more expensive EVERY payment you make. Keep in mind that this is the same case with any type of debt insurance (credit card insurnaces, loan insurances, line of credit insurnaces, etc)

The bank owns creditor insurance, not you. IF they decide to cancel or change your insurance they can do it and you have no say. With a term insurance contract the company can't change anything.

Which Creditor insurance, it only pays the mortgage. One Question: What if the mortgage isn't the biggest concern? How are you going to pay the funeral expenses? The power bills? etc? Oh, wait...you just paid off your mortgage...the bank will just lend you more....the bank continues to make money from you...it just moves from a mortgage to a line of credit.

HUGE point: The underwritting. Creditor insurance is underwritten (the process in which they decide if you are eligible to make a claim) is done at the time of claim. What that means is that you can pay into the insurance for decades and still get declined quite easily and get no money back. (See the CBC Marketplace link below) Term insurance does the underwritting at the time of application, so you know you are eligible or not before you even pay the first premium.

Rather than a lengthly long post here are some links that compare the differences including some independent news reports comparing them:


http://www.conservest.ca/Term-Insurance-…

http://www.cbc.ca/marketplace/in_denial/

http://www.sunlife.ca/plan/v/index.jsp?v…

http://www.asset-aid.com/bank_vs.html