Those who are considering a home loan.Those who heard the explanation of group credit life insurance when applying for a home loan but did not understand it.
Those who have group credit life insurance and are considering reviewing their life insurance.
There are cases where joining a group credit is required when borrowing a home loan, so if you are considering buying a home, it would be a good idea to know the details.
In this article, we will explain the advantages and disadvantages of group trusts and the differences between them and general life insurance.
Some of you may be familiar with the name and system called Danshin, but please check again.
এক পলকে
what is the difference between mortgage insurance and mortgage life insurance
If a home buyer pays less than 20% as a down payment, lenders often require mortgage insurance. This insurance shields the lender if the borrower fails to repay the loan. On the other hand, mortgage life insurance ensures that the mortgage is paid off in the event of the borrower’s passing. It safeguards the borrower’s family from having to inherit the mortgage debt.
is mortgage life insurance worth it mortgage protection insurance
how much is mortgage life insurance per month
The value of mortgage life insurance (MLI) varies based on your situation. It offers reassurance that your family won’t be burdened with mortgage payments in case of your untimely death. However, it’s crucial to evaluate your financial stability, existing life insurance, and the cost of MLI premiums. Comparing quotes and carefully reviewing policy terms will aid you in deciding if MLI fits your needs and financial plan.
The monthly cost of mortgage life insurance depends on factors like your age, health, coverage amount, and policy type. Typically, premiums can range from $15 to $50 per month for every $100,000 of coverage. To get a precise quote tailored to your situation, it’s recommended to contact insurance providers for estimates.
mortgage life insurance calculator
Insurance companies often provide online calculators for mortgage life insurance. These tools help you estimate the cost of coverage based on your specific details, including age, gender, health, loan size, and policy duration. You can easily access these calculators on insurance company sites or independent comparison websites. Just enter your information, and the calculator will provide an approximate monthly premium for your coverage.
does life insurance cover mortgage joint mortgage protection insuranc
Life Insurance as Mortgage Protection:If you have a mortgage, life insurance can protect it by making your mortgage one of the beneficiaries. When you die, the life insurance payout goes to the mortgage, reducing or eliminating the remaining balance. Joint Mortgage Protection Insurance: This specialized life insurance protects couples with a joint mortgage. * If one partner passes away, the policy pays out a sum to help cover some or all of the mortgage, ensuring the surviving partner can stay in the home without financial struggles
does mortgage insurance cover death of spouse
Mortgage insurance usually protects against certain events tied to the mortgage, such as the borrower passing away, becoming unable to work, or losing their job. However, the coverage differs depending on the conditions and terms of the policy. Some mortgage insurance policies may cover the death of a spouse if they are also named on the mortgage or are a co-borrower. It’s important to carefully read the details of your mortgage insurance policy or speak to your insurance provider to fully understand what’s covered in the event of your spouse’s death.
What is group credit life insurance (group credit)?
Group credit life insurance is often abbreviated as danshin . Group credit is mainly insurance that you contract when taking out a home loan. When a mortgage holder dies or becomes seriously disabled, insurance benefits are paid, and the insurance proceeds are used to pay off the mortgage loan. Since a home loan involves borrowing a large sum of money, tens of millions of yen, joining a group credit gives you the peace of mind that you won’t have to worry about repayments in the unlikely event that something happens.
When you borrow a home loan from a private financial institution, it is almost always a condition that you enroll in group credit insurance .
With Flat 35 and other services provided by the Japan Housing Finance Agency, joining a group credit is optional.
When joining a group trust, there is a notification (examination) similar to general life insurance.
Therefore, depending on your health condition, you may not be able to join a group credit, and you may not be able to obtain a home loan from a private financial institution.
Alternatively, you can join a group credit that has relaxed underwriting conditions in the form of a predetermined interest rate added to the regular mortgage interest rate.
What is the difference between group trust and general life insurance?
Let’s take a look at the differences between group trust and regular life insurance. When considering a home loan, there are many cases of joining a group trust, so be sure to check that. You may want to consider reviewing your life insurance coverage to match the details of your group trust.
Difference in insurance premiums
With group credit, the insurance premium is often added to the interest rate, so basically you will also pay the insurance premium at the time of your monthly loan repayment.
On the other hand, there is also a way to pay the insurance premium separately from the mortgage repayment.
In addition, the insurance premiums for group trusts are proportional to the balance of the mortgage loan at the time, so the more you make repayments, the less the insurance premiums will be.
Premiums for general life insurance are determined based on coverage, age, gender, etc., but premiums for group trusts do not change based on age, gender, etc.
The insurance premium burden varies depending on the coverage and loan balance.
Differences in beneficiary of insurance money
In the case of general life insurance, the beneficiary of the insurance proceeds is the person designated by the policyholder, but the beneficiary of the insurance proceeds with group trust is the financial institution with which the mortgage loan is contracted . When a policyholder has a reason to pay an insurance claim, the paid insurance money will be used to repay the mortgage loan.
Differences in the length of coverage
With regular life insurance, you are covered for the period of insurance specified at the time of contract.
If you cancel your policy midway through, it will end at that point, but whole life insurance lasts for the rest of your life, and term insurance lasts for the period specified at the time of contract.
On the other hand, the period during which the group credit guarantee continues is during the repayment period of the mortgage . The warranty period begins when the mortgage repayments begin, and ends when the repayments are completed.
If you make early repayments and the repayment period is shortened, the guarantee period will also be shortened.
Special terms attached to group trusts
The basic coverage of group trust is that insurance money will be paid in the event of the policyholder’s death or severe disability.
Furthermore, by adding special provisions, group trust guarantees can be applied under various circumstances. However, it is important to note that the burden of insurance premiums will be higher
as the special contract will be added to the interest rate of the home loan . Please consider the details of the special contract and the burden of insurance premiums.
Couple Renseidan Shin
When a couple takes out a home loan, it is common for one spouse to be the primary debtor and the other as a joint debtor, or for each spouse to take out a home loan in a pair loan.
Group trusts are only covered if the main debtor dies.
For example, if the husband is the primary debtor, the balance of the mortgage will be zero when the husband dies, but the mortgage will remain when the wife dies.
In the case of a married couple’s joint trust, the interest rate is added so that when one of the spouses dies, the balance of the mortgage becomes zero, regardless of the equity in the house or the amount of repayments.
Group letter for specific diseases
The three diseases of cancer, acute heart disease, and stroke are collectively called the three major diseases.
These are the top three causes of death for Japanese people, and it is said that about half of Japanese people die from one of the three major diseases. If you add a group credit that covers the three major illnesses as a special clause, the balance of your mortgage loan will be zero if you meet the specified conditions for the three major illnesses.
The reasons for insurance claim payments vary depending on the product and financial institution, so please check. There are also special contracts that limit
coverage to cancer only, and special contracts that extend coverage to eight diseases known as the Eight Major Diseases .
What are the advantages and disadvantages of group trust?
We will summarize the advantages and disadvantages of group trust.
Membership is almost mandator when borrowing a home loan from a private financial institution, so please refer to it when considering where to take a home loan.
Advantages of group trust
- You won’t have to pay back your mortgage in case something happens.
This is the biggest advantage of group trust.
Depending on the financial institution, there are cases where the financial institution pays the insurance premiums for group trusts without special provisions, so you can essentially receive death benefits for free.
Another benefit is that by adding interest, you wo n’t have to pay back the loan even if you get a certain illness or something happens to your spouse . - Insurance proceeds are not taxed
In the case of ordinary death insurance, income tax and gift tax are levied depending on the recipient of the insurance proceeds, but there is no tax on group trust insurance proceeds.
In the case of a group trust, the mortgage is treated as being repaid before the inheritance, so inheritance tax is not imposed. (Reference: National Tax Agency website | Regarding tax treatment of group credit insurance)
Similarly, no tax will be incurred when adding the three major disease special provisions. - You can reduce the amount of death insurance
For example, if you subscribed to cover your family’s housing expenses as death insurance, the coverage will overlap with the coverage provided by your group trust.
If something were to happen to the policy holder, the balance on the mortgage would be reduced to zero and they would be able to continue living, so there would be little worry about housing costs for the family.
If you have death insurance that overlaps with your group trust, you can reduce your monthly premiums by reducing the amount insured.
Disadvantages of group trust
- Not eligible for income tax deduction
If you have regular life insurance, you can take advantage of the life insurance premium deduction, and a certain amount will be deducted from your income tax.
For insurance that is eligible for life insurance premium deduction, the beneficiary of the insurance proceeds is yourself, your spouse, or another relative.
Since the beneficiary of group trust insurance proceeds is a financial institution, it is not eligible for life insurance premium deduction . - The burden of insurance premiums may be large.
Since the insurance premium for group trust is “home loan balance x interest rate”, the insurance premium burden may be higher than for general life insurance.
If the balance of your home loan decreases, the burden of insurance premiums will decrease, but if you contract a general life insurance policy with the same level of coverage, the burden of insurance premiums may be higher if you purchase a group credit.
summary
Group credit is insurance that you take out when signing a mortgage loan.
If something happens to the policyholder, the insurance money will be paid and the mortgage will be paid off in full.
In the case of a home loan without a special contract, there are financial institutions that allow you to enroll at the regular home loan interest rate. If you add a special clause, such as a joint family trust for married couples or a family trust that covers the three major illnesses, the protection will be more generous, but because you will have to add interest, your monthly repayments will increase.
Please consider what kind of group trust to join, taking into account the coverage of your current insurance and your family’s situation. Also, when reviewing your insurance, how much group trust is included? Also check what kind of association you are in.
