Mortgage Life Insurance: Why Should You Get It?

How Does Mortgage Life Insurance Work?

Buying a home is a milestone. But it’s also a time of significant expenses. In addition to the down payment, there are also costs associated with the closing process and other essential banking services, including mortgage life insurance.

For many people, this is a lifetime investment. That’s why it’s important for insurance to protect that investment. But before choosing a plan, you should consider a few things:

• How can you ensure you get the best life insurance for your mortgage?
• How do you choose the coverage for your life insurance policy linked to your mortgage?

These questions shouldn't just be asked at the time of award. Even if you already have insurance, you may also want to ask yourself:

• Do you have the most appropriate coverage, or are you paying for coverage you don't need?
• Can you switch life insurance policies for a mortgage?

To help you answer these questions, we’ve prepared an article explaining how life insurance works with a mortgage and what it covers. But we’ll go a step further and list the tax benefits of this plan and how you can claim them, if necessary.

# What is mortgage life insurance?

As the name implies, this insurance is a mandatory requirement for taking out a mortgage. Banks require this policy to ensure that the outstanding balance will be paid off through the insurance policy.

In other words, life insurance linked to a mortgage ensures that, in the event of premature death or a serious, disabling accident, the debt owed to the bank will be paid off.

This plan thus ensures your family's financial protection and stability, while safeguarding your assets.

In short, it serves as a safeguard not only for the bank, but also for you and your family.

# What does mortgage life insurance cover?

Not all life insurance policies are the same. Each plan has a different range of coverages and exclusions. It all depends on what’s in the policy, since there are Various types of life insurance for home loans with optional coverage that affects the amount to be received.

Two types of coverage to consider in your insurance policy are Absolute and Permanent Disability (IAD) and Total and Permanent Disability (ITP). Although the acronyms seem similar, the coverage they provide is different and can make all the difference.

Let's get to know them better.

# Total and Permanent Disability (ITP)

ITP coverage may be triggered when the policyholder is the victim of a
an accident or illness that results in disability between 60% and 75%, depending on the insurer.

In other words, this coverage is triggered when the insured person becomes unable to perform their
profession (or other compatible activity), and it is proven that the person is unable to work for more than
60%—definitely, and there's no room for improvement.

This is the option that offers the most protection, since the insurance company guarantees repayment of the mortgage.

”Since this is a policy with comprehensive coverage, it does come with a higher premium; however, this is justified when compared to the following option, which we will analyze next."

# Absolute and Permanent Disability (IAD)

On the other hand, IAD coverage only ensures repayment of the loan, if the insured person, due to illness or accident, is permanently and irreversibly unable to perform any paid work and has a permanent need for assistance from a third party to carry out the ordinary activities of daily life and, depending on the insurer, may also be required to have a disability rating of 85% or higher, in accordance with the national disability scale

In turn, this option is a more economical solution; however, as you can see, the differences between coverage for IAD and ITP are enormous, and the likelihood of being able to file an insurance claim for IAD is much lower than for ITP. Even if you are unable to work, if you do not meet the specified medical criteria, you will still need to continue making your mortgage payments.

However, please note that each insurance company has different criteria for its policy provisions. Therefore, check which criteria you’ll need to meet to file a claim under each coverage so you can choose the insurance company with the least stringent requirements.

Also, don't choose the cheapest mortgage life insurance policy just because of the price. Instead, opt for the most economical option that offers the most comprehensive coverage.

Why should you get life insurance for a mortgage?

Taking out life insurance means providing financial protection for yourself and your family. In addition to safeguarding your assets, you’re also looking out for your well-being and that of your family.

At the same time, mortgage life insurance has the advantage of being tax-deductible for personal income tax purposes in some cases, specifically if:

• has a disability with a degree of disability equal to or greater than 60%;
• is in a high-wear-and-tear profession;
• or if you have a retirement savings plan (PPR).

A Benefits of Life Insurance for a Mortgage The IRS doesn't end here. If your loved one has passed away and you are entitled to receive compensation from the insurance company, you won’t have to worry about the government taxing that money. This type of income is tax-exempt for beneficiaries of life insurance policies.

How do I file a claim under my mortgage life insurance policy?

Although coping with the death of a loved one is a painful experience, there are a few steps you should be aware of in order to file a claim on your mortgage life insurance.

First of all, especially if you are unsure or do not have all the information about the insured person, you can request information from the Insurance and Pension Funds Supervisory Authority (ASF).

This organization can help you learn about your rights by filling out the form requesting information on life insurance, personal accident insurance, and capitalization plans. To submit the request, you must also attach the death certificate and the applicant’s identification documents to the file.

Next, you must notify the insurance company of the person’s death as soon as possible by filling out the appropriate forms and submitting the necessary documents, which include, among others:

• claims report form;
• original or certified copy of a death certificate;
• autopsy report;
• police report;
• results of drug screening tests;
• blood alcohol test results;
• and documents that verify the identity and status of the beneficiary/heir who is entitled to compensation.

After the documents are submitted, the insurance company generally has up to 30 days to pay the benefits under the insurance policy. However, payment may be delayed if the insurance company requests additional clarification regarding the claim.

In these cases, especially during times of great emotional distress, it can be difficult to find the strength to move forward with this process. Therefore, you may want to ask your insurance company or your insurance broker for help.

At EXS Seguros, we have a team of professionals at your service to help you at every stage of your life, especially when you need it most. That’s why, Please feel free to contact us whenever you need to.

What is the best life insurance policy for a mortgage?

More important than finding the cheapest mortgage life insurance is finding the plan that best suits your needs at a competitive price.

Contrary to what most people think, you can have this plan with another insurance company that isn’t affiliated with the bank where you took out the loan. Often, the savings you achieve by switching insurance companies offset any potential increase in the spread charged by the bank.

Therefore, Request a life insurance quote mortgage loans from different companies, to find the plan that offers the best value for money.

To do so, you can use our mortgage life insurance calculator. Simply enter your information and request a free quote. We’ll contact you to request more information, and by comparing data from the most competitive insurers in Portugal (specifically Advancecare, ARAG, Asisa, Caravela, Fidelidade, Liberty Seguros, Lusitania Seguros, MAPFRE, Médis, Metlife, MGEN, Multicare, Popular Seguros, PRÉVOIR, Real Vida Seguros, Saúde Prime, Tranquilidade, Una Seguros, Victoria, and Zurich), we’ll offer you the most suitable solution.

And even if you already have a plan, you can request a simulation And we can help you switch your mortgage life insurance. You can switch your life insurance at any time and save on your monthly premium.

In short, the best mortgage life insurance is the one that suits you, your family, and your needs—at a competitive price. If you need help, at EXS we guarantee the support you need to find the most advantageous solution.