If you are still thinking whether to buy either mortgage life insurance or term life insurance, you are not alone in this puzzle. A mortgage life insurance policy is a policy where your insurance provider pays your mortgage debt after your death. A term life insurance, on the other hand, is a policy where your insurance provider pays a death benefit to the beneficiary if you die within the period stated in your insurance contract. Below are other differences between these two life insurance policies.
On the one hand, mortgage life insurance pays off your mortgage debt if you die without fully paying your mortgage. On the other hand, term life insurance pays insurance benefits to the person of your choice if you die within the agreed period. The term life insurance policy though has no particular purpose attached to it. Your dependent can use the death benefits in any way they want.
Recipient of death benefits
The recipient of the mortgage life insurance policy is the company you owe money (bank, real estate company, etc.). However, the person you state on a term life insurance contract is the receiver of the insurance death benefits.
Applying for and buying a mortgage life insurance policy is easy because it does not require medical tests. Unlike mortgage life insurance, term life insurance is hard to purchase as it requires serious medical examination and personal information.
Mortgage life insurance is expensive because it does not require medical exams. The term life insurance policy is affordable, and if you are young and healthy, term life insurance is cheaper.
Value of the policy
The value of your mortgage life insurance policy reduces as you pay your mortgage. The worth of your mortgage life insurance policy reduces because your policy only covers the amount you owe. However, the premium you pay stays the same. In contrast to mortgage life insurance, term life insurance policy does not go down in value; it has the same value at all times.