How Life Insurance on Mortgage Works

+Getting Life insurance on a mortgage is designed to pay off the rest of your mortgage should you or your spouse pass away while still owing money. For homeowners, the mortgage they carry is probably the largest debt they will have in their lifetime. When arranging your mortgage it is quite common for the bank or lender to offer mortgage insurance. This type of mortgage insurance offered by your local lender is often misunderstood and should be avoided at all cost. Here are the reasons why.

Lenders usually offer what is called post-underwritten creditor insurance. It usually has a nice name and borrowers usually agree and fill out the simple questions on the application and never give it a second thought. What people don’t realize is, this policy hasn’t really been approved yet and when there is a death the lender will start underwriting the policy by contacting the deceased’s doctor and requesting medical files to see if there is anything in those files that might make the policy invalid. If they find inconsistencies they are within their rights to DENY THE CLAIM.

Do yourself a favour and contact an insurance broker and apply for an insurance policy that is underwritten at the time of application. The insurance company will ask very detailed questions and it is not uncommon for them to have a nurse drop by and do what is called a Paramedical. The insurance company may even contact your doctor and request your medical files while underwriting the policy. If you are approved (most people are) then you can be confident that you really do have a life insurance policy that will look after the mortgage after you are gone. Your spouse and loved ones can then continue to live in the house without having financial worries.