What is Veterans' Mortgage Life Insurance (VMLI)?

Posted by Lauren Schneider on Friday, December 3rd, 2021 at 7:38am.

What Is Veterans' Mortgage Life Insurance (VMLI)?Veterans' Mortgage Life Insurance, or VMLI, is protection available to veterans. The coverage is extended specifically to veterans with service-connected disabilities who have modified their homes to be more accessible. For example, they may have widened doorways or added wheelchair ramps are home improvements that qualify for the program. The purpose of the coverage is to make payments to the mortgage in the event of the policyholder's passing. Are you researching what housing grant options are available to veterans? Keep reading to learn more about veterans' mortgage life insurance.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

How Does VMLI Coverage Work?

Veterans' Military Life Insurance is different from standard life insurance, a cash sum paid directly to a named beneficiary. Instead, it goes straight to the bank or whoever holds the mortgage. It's used to pay off at least a portion of the mortgage balance so that the surviving household members can keep the home without being overwhelmed by payments. There is a limit to how much VMLI will pay. In 2021, that was $200,000.

VMLI is decreasing term insurance that's tied to the mortgage balance. As the amount owed on the home mortgage goes down, the coverage drops along with it. Unlike some policies, VMLI has no loan value or cash value, and it doesn't pay dividends. Because the money goes directly to a lender, the insured doesn't name anyone as the beneficiary.

The home goes to whoever is designated to inherit, and they get a deduction of up to $200,000 on the remaining mortgage.

Who Is Eligible for VMLI?

VMLI is available to eligible veterans with disabilities connected to their service. There's a specific list of disabilities that qualify, including:

  • The loss of more than one limb or the loss of use of those limbs
  • The loss, or loss of use, of a lower leg along with the lasting effects of a disease or injury
  • Blindness in both eyes, with an acuity of 20/200 or worse
  • Qualified severe burns
  • The loss, or loss of use, or one foot or leg, to the degree that requires braces, crutches, canes, or a wheelchair

The disability not only has to be severe, but it also has to be one where living independently in a non-modified house would be difficult. The condition must have been caused by, or worsened by, the person's service.

The insured must have first received a Specially Adapted Housing (SAH) grant. Applying for and receiving the grant is a separate process that must precede the VMLI application. SAH grants had a maximum amount of $100,896 in 2021, and this threshold is subject to change. The amount of VMLI coverage is not based on the amount of the SAH grant but rather on the mortgage balance on the home.

The insured must be a homeowner with a valid title and a mortgage. They must be under 70 years old when they apply.

VMLI is meant for existing mortgages, refinances, second mortgages, and construction loans. The insurance isn't intended for reverse mortgages or home equity lines of credit (HELOCs).

What Does VMLI Cost?

Premiums are based on the insured age, the current mortgage balance, and the number of payments remaining.

What Happens If the Mortgage Changes?

The veteran must inform the Department of Veteran Affairs if they move or sell the property. They also need to report whether they refinance the mortgage with another lender or give up the mortgage because of foreclosure or bankruptcy.

If the insured sells the home and buys a different one, they can apply once more for VMLI.

VMLI Offers Extra Peace of Mind

As a service to the people who serve in the military, Veterans' Mortgage Life Insurance offers coverage to service members with disabilities. VMLI was created to ensure extensive coverage for the households of veterans with disabilities so that they won't have to worry about being late on a mortgage as a military member.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

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