A home is often the biggest expense of many people's lives and is also typically one of the things which is most important to them. Because mortgages often take years and even decades to pay off, they can often cause headaches for borrowers. As such some people tend to be concerned about what would happen to their loved ones if they died and left a considerable amount outstanding on the home loan. This is what mortgage life cover has been designed to provide reassurance for.
All types of life insurance usually involve a payout in the event of the policy holder's death, and the cash can go to a close family member, but not necessarily a blood relative, so it can be a husband or wife. It can even go to someone like a business partner if you prefer, say if you have a mortgage taken out jointly with them for a business premises. Mortgage life cover is no different and will provide a sum of money to go towards paying off the balance of the mortgage on your death.
Mortgage protection like this normally comes in two different types-and this can depend on the exact type of deal that you have - ie a repayment or an interest only mortgage. Firstly decreasing term insurance is specifically geared to people with a repayment deal. The idea of this is that as the amount owed on the mortgage goes down over time so does the amount of payout guarantees by decreasing term insurance policy. This guarantees that the amount your family would get in the event of your death covers the outstanding balance.
The usual procedure is to take out a policy which covers the whole term of the mortgage itself, and then the cash is paid should the person die during its term.
Then there is level term insurance which is for people who have a repayment mortgage with the balance outstanding staying the same through the lifetime of the home loan and the repayments made only covering the interest. The amount insured remains the same through the whole life of this policy because the actual outstanding balance on the home loan says the same.
This means there is a fixed amount which does not change which is paid out in the event of the death of a policy holder. Both of these types of mortgage life cover may include terminal illness cover which will pay off someone's outstanding home loan in the event they are diagnosed with a terminal illness, rather than paying out on the actual death.
Then there is critical illness cover which can be added to all types of life cover including those related to a mortgage. Normally this will payout in the event that somebody is diagnosed with a serious but not necessarily fatal condition, such as cancer or multiple sclerosis.
Mortgage life cover is a straightforward way of helping to get peace of mind on what would happen to your loved ones if you died and left an outstanding mortgage balance. With plenty of insurers, not just mortgage providers, able to supply policies, there is always the chance you will get an effective and affordable deal.
David Thomson is Chief Executive of BestDealInsurance a completely independent specialist broker dedicated to providing their clients with the best insurance deal.
They offer great value life insurance as well as, critical illness and income protection, ensuring that their clients have the protection they need, without leaving a hole in their pocket.
All types of life insurance usually involve a payout in the event of the policy holder's death, and the cash can go to a close family member, but not necessarily a blood relative, so it can be a husband or wife. It can even go to someone like a business partner if you prefer, say if you have a mortgage taken out jointly with them for a business premises. Mortgage life cover is no different and will provide a sum of money to go towards paying off the balance of the mortgage on your death.
Mortgage protection like this normally comes in two different types-and this can depend on the exact type of deal that you have - ie a repayment or an interest only mortgage. Firstly decreasing term insurance is specifically geared to people with a repayment deal. The idea of this is that as the amount owed on the mortgage goes down over time so does the amount of payout guarantees by decreasing term insurance policy. This guarantees that the amount your family would get in the event of your death covers the outstanding balance.
The usual procedure is to take out a policy which covers the whole term of the mortgage itself, and then the cash is paid should the person die during its term.
Then there is level term insurance which is for people who have a repayment mortgage with the balance outstanding staying the same through the lifetime of the home loan and the repayments made only covering the interest. The amount insured remains the same through the whole life of this policy because the actual outstanding balance on the home loan says the same.
This means there is a fixed amount which does not change which is paid out in the event of the death of a policy holder. Both of these types of mortgage life cover may include terminal illness cover which will pay off someone's outstanding home loan in the event they are diagnosed with a terminal illness, rather than paying out on the actual death.
Then there is critical illness cover which can be added to all types of life cover including those related to a mortgage. Normally this will payout in the event that somebody is diagnosed with a serious but not necessarily fatal condition, such as cancer or multiple sclerosis.
Mortgage life cover is a straightforward way of helping to get peace of mind on what would happen to your loved ones if you died and left an outstanding mortgage balance. With plenty of insurers, not just mortgage providers, able to supply policies, there is always the chance you will get an effective and affordable deal.
David Thomson is Chief Executive of BestDealInsurance a completely independent specialist broker dedicated to providing their clients with the best insurance deal.
They offer great value life insurance as well as, critical illness and income protection, ensuring that their clients have the protection they need, without leaving a hole in their pocket.
If you have a mortgage, then mortgage life cover will make sure the loan is paid off in the event of your death, or, if you take out some add-on benefits, should you suffer from a critical illness or cannot work due to illness or disability.
Mortgage insurance is often called 'decreasing term cover' because the policy lasts the life of your mortgage and pays out a smaller amount each year as your mortgage decreases.
Although the amount of cover the policy pays out decreases in line with what you owe your mortgage lender, the premium you pay the insurance company each month stays the same.
These mortgage policies are cheaper than term life insurance and are guaranteed to pay off you mortgage if you die unexpectedly - providing you haven't increased your mortgage without increasing the sum assured under the policy, of course.
If you do borrow more, you should review your policy and consider taking out a top-up.
Remember, if you outlive the mortgage policy, you and your family get nothing. The policy only pays out when you die during the policy term unless you have included optional extras at additional cost.
These extras include:
· Waiver of premium
The insurance company pays your premiums for a set period if you cannot work due to sickness or disability
· Guaranteed or reviewable premiums
If your premiums are guaranteed they remain the same for the life of the policy. Reviewable premiums are adjusted periodically, meaning you can end up paying significantly more than you started with for the same cover.
· Critical illness
This add-on pays out a lump sum if you are diagnosed with an illness listed in the policy documents regardless of whether you return to work at a later date.
Most insurers won't pay out on your death if they have already paid out for a critical illness.
· Terminal illness
If the policyholder is diagnosed with a terminal illness, the policy pays out early.
Mortgage life cover is available on a single life or jointly with a partner or spouse if you hold a mortgage in joint names.
For a single life, the policy pays out on the death of the policyholder - or if one of the add-on events is triggered.
For joint lives, you have a choice on how the policy pays out.
Either the policy pays out on 'joint life, first death', that leaves the surviving policyholder with the cash.
Alternatively, the policy can be 'joint death, second life', sometimes called 'joint life, last survivor', which pays out on the death of the surviving policyholder. This would pay off the mortgage and leave children with an asset they could continue to live in or sell.
If you have mortgage life cover, always consider putting the policy in trust. This is simple to do and costs nothing. Generally, the insurance company provides a deed of trust.
Putting the policy in trust effectively puts the policy outside of your estate, so the money goes straight to your family rather than sitting in probate while your executor sorts out your will.
David Thomson is Chief Executive of BestDealInsurance an independent specialist broker dedicated to providing their clients with the best deal on their life insurance, critical illness cover and home and motor insurance.
Mortgage insurance is often called 'decreasing term cover' because the policy lasts the life of your mortgage and pays out a smaller amount each year as your mortgage decreases.
Although the amount of cover the policy pays out decreases in line with what you owe your mortgage lender, the premium you pay the insurance company each month stays the same.
These mortgage policies are cheaper than term life insurance and are guaranteed to pay off you mortgage if you die unexpectedly - providing you haven't increased your mortgage without increasing the sum assured under the policy, of course.
If you do borrow more, you should review your policy and consider taking out a top-up.
Remember, if you outlive the mortgage policy, you and your family get nothing. The policy only pays out when you die during the policy term unless you have included optional extras at additional cost.
These extras include:
· Waiver of premium
The insurance company pays your premiums for a set period if you cannot work due to sickness or disability
· Guaranteed or reviewable premiums
If your premiums are guaranteed they remain the same for the life of the policy. Reviewable premiums are adjusted periodically, meaning you can end up paying significantly more than you started with for the same cover.
· Critical illness
This add-on pays out a lump sum if you are diagnosed with an illness listed in the policy documents regardless of whether you return to work at a later date.
Most insurers won't pay out on your death if they have already paid out for a critical illness.
· Terminal illness
If the policyholder is diagnosed with a terminal illness, the policy pays out early.
Mortgage life cover is available on a single life or jointly with a partner or spouse if you hold a mortgage in joint names.
For a single life, the policy pays out on the death of the policyholder - or if one of the add-on events is triggered.
For joint lives, you have a choice on how the policy pays out.
Either the policy pays out on 'joint life, first death', that leaves the surviving policyholder with the cash.
Alternatively, the policy can be 'joint death, second life', sometimes called 'joint life, last survivor', which pays out on the death of the surviving policyholder. This would pay off the mortgage and leave children with an asset they could continue to live in or sell.
If you have mortgage life cover, always consider putting the policy in trust. This is simple to do and costs nothing. Generally, the insurance company provides a deed of trust.
Putting the policy in trust effectively puts the policy outside of your estate, so the money goes straight to your family rather than sitting in probate while your executor sorts out your will.
David Thomson is Chief Executive of BestDealInsurance an independent specialist broker dedicated to providing their clients with the best deal on their life insurance, critical illness cover and home and motor insurance.
The demand for mortgage life cover is likely to come from your mortgage lender. Indeed, it is often made a condition of the mortgage advance that the borrower has sufficient life insurance in place to cover the mortgage. What does this mean in practice?
Why is it demanded?
When advancing a loan that is the size of the average mortgage, the lender is assuming a considerable risk - the risk that the money lent might not be repaid. Although there are many reasons why borrowers might default on their mortgage repayments, a very real difficulty is presented to the lender if the borrower dies before the maturity of the mortgage.
The idea behind life mortgage cover, therefore, is that, as a borrower, you take out a term life insurance, with the insurance term set to coincide with the term of the mortgage, and an insured amount equivalent to the outstanding balance of the mortgage.
How does it work?
If you die before the mortgage is fully repaid, therefore, the life insurance company pays out a benefit that is equal to the outstanding mortgage balance and the debt is paid off. The lender gets his money back and your family or dependants enjoy the security of continuing to live in the home which is now mortgage-free.
This kind of term life insurance even works with respect to standard repayment type mortgages. With these, of course, the amount outstanding to the mortgage lender decreases with each successive year, until it has reached zero at the end of the mortgage term. For these purposes, therefore, a decreasing term life insurance has been developed in which the insured sum payable on the policy holder's death decreases by a given amount with each passing year - so conveniently matching the rate at which the outstanding mortgage debt is also diminishing.
All in the lender's favour?
Some people might think that because mortgage life cover has been insisted upon by the mortgage lender, then it is something solely for the benefit of the lender.
As we have seen, it is certainly in the mortgage lender's interest to require an adequate level of life cover on the borrower's part.
However, it is also a considerable value to the borrower him or herself. If you have a mortgage and were to die before the debt is repaid, for instance, how might your family or dependants cope? Do you seriously expect that an alternative breadwinner from amongst your dependants might be able to step up to the plate and assume responsibility for the mortgage? Unless that is the case, of course, then mortgage life cover offers one of the few ways in which the roof over your family's head might be saved.
There is one form of insurance that does protect the mortgage lender alone, however, and that is mortgage indemnity insurance. It should not be confused with mortgage life cover. Mortgage indemnity insurance is a safeguard some lenders apply in the case of certain borrowers where there is a perceived higher than normal risk of repayments falling into arrears or default. The insurance ensures that the lender nevertheless recovers the outstanding balance of the mortgage. Even so, it is the borrower who pays the premiums for the lender's protection.
David Thomson is Chief Executive of BestDealInsurance a completely independent specialist broker dedicated to providing their clients with the best insurance deal.
They offer great value life insurance as well as, critical illness and income protection, ensuring that their clients have the protection they need, without leaving a hole in their pocket.
Why is it demanded?
When advancing a loan that is the size of the average mortgage, the lender is assuming a considerable risk - the risk that the money lent might not be repaid. Although there are many reasons why borrowers might default on their mortgage repayments, a very real difficulty is presented to the lender if the borrower dies before the maturity of the mortgage.
The idea behind life mortgage cover, therefore, is that, as a borrower, you take out a term life insurance, with the insurance term set to coincide with the term of the mortgage, and an insured amount equivalent to the outstanding balance of the mortgage.
How does it work?
If you die before the mortgage is fully repaid, therefore, the life insurance company pays out a benefit that is equal to the outstanding mortgage balance and the debt is paid off. The lender gets his money back and your family or dependants enjoy the security of continuing to live in the home which is now mortgage-free.
This kind of term life insurance even works with respect to standard repayment type mortgages. With these, of course, the amount outstanding to the mortgage lender decreases with each successive year, until it has reached zero at the end of the mortgage term. For these purposes, therefore, a decreasing term life insurance has been developed in which the insured sum payable on the policy holder's death decreases by a given amount with each passing year - so conveniently matching the rate at which the outstanding mortgage debt is also diminishing.
All in the lender's favour?
Some people might think that because mortgage life cover has been insisted upon by the mortgage lender, then it is something solely for the benefit of the lender.
As we have seen, it is certainly in the mortgage lender's interest to require an adequate level of life cover on the borrower's part.
However, it is also a considerable value to the borrower him or herself. If you have a mortgage and were to die before the debt is repaid, for instance, how might your family or dependants cope? Do you seriously expect that an alternative breadwinner from amongst your dependants might be able to step up to the plate and assume responsibility for the mortgage? Unless that is the case, of course, then mortgage life cover offers one of the few ways in which the roof over your family's head might be saved.
There is one form of insurance that does protect the mortgage lender alone, however, and that is mortgage indemnity insurance. It should not be confused with mortgage life cover. Mortgage indemnity insurance is a safeguard some lenders apply in the case of certain borrowers where there is a perceived higher than normal risk of repayments falling into arrears or default. The insurance ensures that the lender nevertheless recovers the outstanding balance of the mortgage. Even so, it is the borrower who pays the premiums for the lender's protection.
David Thomson is Chief Executive of BestDealInsurance a completely independent specialist broker dedicated to providing their clients with the best insurance deal.
They offer great value life insurance as well as, critical illness and income protection, ensuring that their clients have the protection they need, without leaving a hole in their pocket.
Although there are variations from plan to plan, most Rhode Island homeowners insurance policies cover the major disasters that can befall a house. This includes fire, lighting taking out the central air conditioner unit, pipes breaking and causing water damage, or a tree dropping a limb and causing damage to the roof. Items such as these are covered under a general insurance policy, but damages that occur to your home as a result of a flood or an earthquake are not covered. In order to be insured against flood and earthquake damage special coverage must be purchased in addition to a regular policy.
Also, depending upon the area in which a house is located, many policies do not cover wind damage to a home. Many states have certain areas that are termed a 'high risk' for damages as a result of high occurrences of tornadoes, severe thunderstorms and hurricanes. If your home is located in one of these areas, your general insurance policy will not pay for damages brought on by the forces of nature. Unfortunately, after Hurricane Katrina, the areas deemed by insurance companies to be a "high risk" have grown considerably. Not only have the southern states bordering the Atlantic and the Gulf been affected by dropped policies and very high insurance premiums, the Mid-Atlantic and New England States have been negatively affected as well.
Although many homeowners' insurance policies in Rhode Island have been dropped by insurance carriers after Hurricane Katrina, homeowners are still usually able to find insurance with other carriers, albeit at the cost of higher premiums and deductibles. However, the number of people in Rhode Island who need to be covered by state insurance pools has remained relatively low. A state insurance pool is a state-created insurer of last resort where the private market has dropped homeowners coverage or failed to provide initial coverage. It is operated jointly by private insurers who sell homeowners insurance in the state of Rhode Island.
Under this plan, the monetary gains and losses are spread out among the participating insurers. This insurance pool was designed to offer affordable insurance to those who cannot obtain it elsewhere. However, in the state of Massachusetts where 40% of the homeowners on the Cape must use their state insurance pool, this system is already asking to be allowed to increase their rates by 25%. Hopefully, Rhode Island will not follow suit.
OPTIONS WITHIN A RHODE ISLAND HOMEOWNER'S INSURANCE POLICY
REPLACEMENT COST OR ACTUAL CASH VALUE
Homeowner's insurance companies offer policies based on the replacement cost of a home or its actual cash value. Most insurers (and mortgage companies) require that the home be insured for at least 80% of the replacement cost.
Replacement Cost - Under this plan, if damages occur, the insurance company will pay the amount needed in order to repair damages or to replace an item. If there is a fire in your basement and your furnace needs to be replaced, the insurance would pay to have a new furnace put in, even if the furnace that was destroyed was quite old. Depreciation of the item's value would not be taken into account.
Actual Cash Value- This plan works quite differently from a replacement cost plan. Under this plan if there is a fire in your basement and the furnace needs to be replaced, a cash value will be assigned to that item. The age and condition would be taken into consideration and If your furnace was ten years old, you would be given the cash value of a ten-year old furnace.
Most insurance companies cover your personal belongings (the contents of your home) on an actual cash value basis. However, if you are willing to pay a slight increase in your premiums, an option is usually available with many insurance companies that would allow you to insure your possessions for their full replacement costs. Even within these two parameters there are some limitations. Jewelry, valuable antiques, expensive plasma TVs, guns, computers, and money may have to be insured with additional coverage.
If you on a small boat it would be to your advantage to check around, as some insurance carriers offer insurance for small boats as a part of their homeowner's insurance.
ADDITIONAL LIVING EXPENSES
If damage is so great to your house that you are unable to live in it while repairs are being made, most insurance plans offer to cover a limited motel stay, restaurants, and even some storage facility fees.
PERSONAL LIABILITY
Under personal liability you and your family members are protected against lawsuits and claims made because of negligence on your part. (The kids left the skateboard on the front door step and someone tripped over it and was injured.) It also protects against claims because of property damage, although this does not include vehicles.
MEDICAL PAYMENTS
This covers any injuries that may occur to someone on your property regardless of who is at fault. It does not however apply to you or any family member living in the home. There are also some exceptions that apply to activities surrounding an in-home business.
FACTORS TO CONSIDER
RI homeowners insurance coverage is designed to protect you from loss due to damage or destruction of your home. It's important to know before you buy homeowners insurance what it would cost you to rebuild your home so that you can know what amount will adequately insure you home. What you originally paid for your home is not a factor in the equation. However, keep in mind, that although the value of the land upon which your house is built was included in what you paid for your home, that value is not part of the value associated with your homeowners insurance policy.
COMPARE RHODE ISLAND HOMEOWNERS INSURANCE RATES
Be sure that you shop around before you purchase. Compare RI home insurance quotes from at least 5 different companies before making a buying decision.
Get started finding Rhode Island homeowners insurance today!
Also, depending upon the area in which a house is located, many policies do not cover wind damage to a home. Many states have certain areas that are termed a 'high risk' for damages as a result of high occurrences of tornadoes, severe thunderstorms and hurricanes. If your home is located in one of these areas, your general insurance policy will not pay for damages brought on by the forces of nature. Unfortunately, after Hurricane Katrina, the areas deemed by insurance companies to be a "high risk" have grown considerably. Not only have the southern states bordering the Atlantic and the Gulf been affected by dropped policies and very high insurance premiums, the Mid-Atlantic and New England States have been negatively affected as well.
Although many homeowners' insurance policies in Rhode Island have been dropped by insurance carriers after Hurricane Katrina, homeowners are still usually able to find insurance with other carriers, albeit at the cost of higher premiums and deductibles. However, the number of people in Rhode Island who need to be covered by state insurance pools has remained relatively low. A state insurance pool is a state-created insurer of last resort where the private market has dropped homeowners coverage or failed to provide initial coverage. It is operated jointly by private insurers who sell homeowners insurance in the state of Rhode Island.
Under this plan, the monetary gains and losses are spread out among the participating insurers. This insurance pool was designed to offer affordable insurance to those who cannot obtain it elsewhere. However, in the state of Massachusetts where 40% of the homeowners on the Cape must use their state insurance pool, this system is already asking to be allowed to increase their rates by 25%. Hopefully, Rhode Island will not follow suit.
OPTIONS WITHIN A RHODE ISLAND HOMEOWNER'S INSURANCE POLICY
REPLACEMENT COST OR ACTUAL CASH VALUE
Homeowner's insurance companies offer policies based on the replacement cost of a home or its actual cash value. Most insurers (and mortgage companies) require that the home be insured for at least 80% of the replacement cost.
Replacement Cost - Under this plan, if damages occur, the insurance company will pay the amount needed in order to repair damages or to replace an item. If there is a fire in your basement and your furnace needs to be replaced, the insurance would pay to have a new furnace put in, even if the furnace that was destroyed was quite old. Depreciation of the item's value would not be taken into account.
Actual Cash Value- This plan works quite differently from a replacement cost plan. Under this plan if there is a fire in your basement and the furnace needs to be replaced, a cash value will be assigned to that item. The age and condition would be taken into consideration and If your furnace was ten years old, you would be given the cash value of a ten-year old furnace.
Most insurance companies cover your personal belongings (the contents of your home) on an actual cash value basis. However, if you are willing to pay a slight increase in your premiums, an option is usually available with many insurance companies that would allow you to insure your possessions for their full replacement costs. Even within these two parameters there are some limitations. Jewelry, valuable antiques, expensive plasma TVs, guns, computers, and money may have to be insured with additional coverage.
If you on a small boat it would be to your advantage to check around, as some insurance carriers offer insurance for small boats as a part of their homeowner's insurance.
ADDITIONAL LIVING EXPENSES
If damage is so great to your house that you are unable to live in it while repairs are being made, most insurance plans offer to cover a limited motel stay, restaurants, and even some storage facility fees.
PERSONAL LIABILITY
Under personal liability you and your family members are protected against lawsuits and claims made because of negligence on your part. (The kids left the skateboard on the front door step and someone tripped over it and was injured.) It also protects against claims because of property damage, although this does not include vehicles.
MEDICAL PAYMENTS
This covers any injuries that may occur to someone on your property regardless of who is at fault. It does not however apply to you or any family member living in the home. There are also some exceptions that apply to activities surrounding an in-home business.
FACTORS TO CONSIDER
RI homeowners insurance coverage is designed to protect you from loss due to damage or destruction of your home. It's important to know before you buy homeowners insurance what it would cost you to rebuild your home so that you can know what amount will adequately insure you home. What you originally paid for your home is not a factor in the equation. However, keep in mind, that although the value of the land upon which your house is built was included in what you paid for your home, that value is not part of the value associated with your homeowners insurance policy.
COMPARE RHODE ISLAND HOMEOWNERS INSURANCE RATES
Be sure that you shop around before you purchase. Compare RI home insurance quotes from at least 5 different companies before making a buying decision.
Get started finding Rhode Island homeowners insurance today!