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Life Insurance vs Mortgage Insurance NZ and AU

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What is the Difference between Mortgage and Life Insurance?

Mortgage insurance, on the other hand, only covers your outstanding mortgage debt. And that money is sent directly to the bank or mortgage lender, not to you. This means that your beneficiary will not receive any cash, payout, or benefit.

Life insurance, on the other hand, provides mortgage protection as well as other benefits. Here’s how it works: every life insurance policy pays the beneficiary a tax-free sum of money (the death benefit). The payment may be used for purposes other than the mortgage. The money can then be used for any purpose by the beneficiary. They can, for example, utilize the income from the death benefit to meet the following expenses in addition to paying off the mortgage:

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any outstanding debts, child care expenditures, funeral fees, child care expenses, and any other living expenses

What is a Life Insurance?

A contract between an insurer and a policyholder is known as life insurance. In exchange for the premiums paid by the policyholder during their lifetime, a life insurance policy promises that the insurer will pay a sum of money to named beneficiaries when the insured dies.

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What is a Mortgage Insurance?

Mortgage insurance is a type of insurance that protects a mortgage lender or titleholder in the event that the borrower fails on payments, dies, or is otherwise unable to meet the mortgage’s contractual obligations. Private mortgage insurance (PMI), qualifying mortgage insurance premium (MIP) insurance, and mortgage title insurance are all examples of mortgage insurance. The obligation to make the lender or property owner whole in the event of specified situations of loss is universal to all of them.

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Mortgage life insurance, on the other hand, is designed to protect heirs if the borrower dies while still owing on the mortgage. Depending on the conditions of the insurance, it may pay the lender or the heirs.

The life insurance application must accurately state the insured’s past and current health issues, as well as high-risk behaviors, in order for the contract to be enforceable.

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