How Does Mortgage Life Insurance Work ?

Hey,

When my uncle had booked a 3 BHK flat, he was worried he wouldn't be able to pay the mortgage for it. Due to a chronic illness, he was completely stressed that the burden would fall on the family. Someone told him how does mortgage life insurance work and he ended up getting insurance he liked.

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What is mortgage life insurance and how does it work?

It is a term life policy that is offered to repay mortgage debts and other costs associated with it in event of the demise of the borrower. Basically, the policy pays a lump sum amount if the borrower dies before clearing the mortgage.

When you take out the policy, you pay an insurance amount. The bank keeps records of it. When you( the borrower) die, the insurance amount is given to the family. The family can then pay the remaining mortgage bills. 

Necessary paperwork and documentation are done by the policyholder/ lender throughout. 

In standard policies, death benefit and any insurance amount is paid after the death of the borrower. In Mortgage insurance cover death policy, the policy payout happens when the mortgage itself is still in existence and the beneficiary is the mortgage lender. Usually, no medical examination is required to apply for such a policy. 

I hope my answer has given you clarity on the meaning of how does mortgage life insurance work.