Life insurance and car insurance are literally lifesavers when it comes to protecting your finances from unexpected mishaps. That’s why financial experts never fail to remind us to get these types of insurance for the future.
While life and car insurance are becoming familiar terms, there’s another type of insurance you should know about, especially if your thinking of getting your own place.
Are you already familiar with mortgage redemption insurance? Well you should be as banks now require on from those getting a housing loan. Read on to find out more about this particular type of insurance.
What is mortgage redemption insurance?
Mortgage redemption insurance (MRI) is another form of life insurance that banks require you to have when applying for a housing loan.
Its purpose is to cover the outstanding balance of the home loan, be it the entire amount or a fraction of it, in case of total disability or untimely death of the home loan borrower.
At first thinking, this MRI seems like an additional obligation that depletes your well-allocated funds and considered unnecessary. However, this requirement does not only serve beneficial to the banks but also you and/or your family.
It makes sure that the outstanding amount from your housing loan will be paid if hypothetically you become disabled or succumb to death. Without MRI, the lender or bank may seize your property or place it in foreclosure.
It’s understandable to say that this insurance is redundant, but in reality, it will spare your surviving family from dealing with the unpaid debt you have left.
How to apply for mortgage redemption insurance
To apply for a mortgage redemption policy is not a sole initiative of the home loan borrowers.There’s no need to look for an MRI provider because it is already part of the application process of getting a housing loan.
If you are already a policyholder of life insurance, that policy can be assigned as your MRI. Instead of your family, you have to indicate that the bank is the recipient of the coverage and the allotment from the sum of your policy. Present this document as proof that there are enough funds to pay the home loan in case the worst happens. Remember that you must reassign portions of your money annually as your loan principal gets diminished with every payment made.
On the other hand, if you don’t have existing life insurance, the bank will ask you to get one, which is commonly incorporated into the housing loan process as a payment in a lump sum or a one-time premium.
For future homeowners and housing loan borrowers, MRI serves as a cushion in unexpected times. It keeps your finances from the web of loan mess and your family from the burden on top of their grief.