Life insurance, final expense insurance, and mortgage protection insurance are all similar in certain ways. They all pay out in the event of the policyholder’s death and they all provide protection for surviving loved ones. Aside from that, they are different types of insurance policies that offer different types of protection.
What Is Life Insurance?
A life insurance policy is a contract with an insurance company. In exchange for the premiums you pay, the life insurance company pays out a lump sum benefit to your designated beneficiaries in the event of your death. Term life insurance provides protection for a specified period of time, such as 10, 20, or 30 years. Whole life insurance provides lifetime coverage, in addition to the tax-deferred accumulated cash value that you can use if you need it. Term life insurance typically comes with lower premiums than whole life insurance.
What Is Final Expense Insurance?
Funeral and burial expenses average approximately $8,000 to $9,000. When you add in medical expenses related to a final illness or injury, along with any other debts, final expenses can be costly. Final expense insurance is designed to offset those costs. It can be tailored to the type of funeral you want and your anticipated final expenses. The price of final expense insurance will depend primarily on the size of the policy you purchase and your age. The younger you are when you buy final expense insurance, the lower your premiums are likely to be.
What Is Mortgage Protection Insurance?
Mortgage protection insurance is a type of life insurance policy that pays off your mortgage if you die. It is a decreasing term life insurance policy, meaning that the death benefit will diminish over time, along with the balance on your mortgage. However, your monthly premium will remain the same throughout the life of the policy.
Mortgage protection insurance should not be confused with private mortgage insurance (PMI), which may be required with a conventional mortgage if your down payment is less than 20% of the home’s value. PMI is designed to protect the lender if you default on your payments for any reason. Mortgage protection insurance is optional and designed to protect the homeowner’s dependents. However, protection is strictly limited to paying the balance on your mortgage, and the premiums are typically higher than for other types of term life insurance.
Do You Need Final Expense Or Mortgage Protection Insurance If You Have Life Insurance?
If you have a whole life insurance policy, the death benefits could cover your mortgage, your final expenses, and then some. If you have term life insurance and outlive the policy, however, there will be no death benefits paid out. Unless you plan to renew for an additional term, you may want to consider final expense insurance and mortgage protection insurance, or a whole life insurance policy as an alternative. Our experienced agent can advise you on your coverage options and help you get the best available quote.
