Expensive homes lead to high mortgage payments and those mortgage payments may lead you to wonder how you could pay them if you lost your job or your health. Mortgage protection insurance is one answer to that question.
What is mortgage payment protection insurance?
Mortgage payment protection insurance, also known as mortgage life insurance, is a financial planning tool that you can use to make sure that your mortgage payments will still be paid even if you become unemployed or disabled. Think of it as a disability or life insurance policy whose benefit can only be used to pay down the balance of your mortgage.
Is it the same thing as Private Mortgage Insurance?
Private mortgage insurance (PMI) is an insurance policy that makes it easier to get financing to buy a home if you don't have enough cash to make a 20% down payment on the home. It provides a payout to your mortgage lender if you default on your loan, but it does not make any mortgage payments or pay off your house balance for you in case you are not able to make your payments. Your mortgage protection insurance policy will list you or your loved ones as beneficiaries and primarily serves your interests, not your lender's, although your lender will certainly be glad that you won't default on your loan payments.
Who needs mortgage protection insurance?
Homeowners who may not be able to qualify for other types of disability or life insurance polices due to the nature of their occupation or the state of their health should consider buying mortgage protection insurance. If you feel that you are at high risk for losing your job, you should also consider coverage. Mortgage protection insurance also makes sense for people who don't have emergency savings that they can use to make mortgage payments if they become temporarily disabled or unemployed.
Benefits of mortgage protection insurance
If you are a homeowner, you can often purchase mortgage protection insurance without a physical examination. If you're in poor health and you don't qualify for other types of life or disability insurance, then mortgage protection insurance may serve you quite well.
Mortgage protection insurance is very easy to buy. If you decide that you want to buy a policy through the mail, make sure that you read all the fine print and that you check up on the insurance company's financial stability before you buy.
Drawbacks of coverage
Your policy insures the balance left on your mortgage and nothing else. If a benefit is paid out, it will pay for your house, but you may still have to sell your home if you don't have income or cash reserves to live on.
The premiums are relatively expensive when compared to term life insurance premiums, which generally provide better value for your dollar, especially if you are in good health.
There are many different types of mortgage protection insurance, including mortgage life insurance, mortgage disability insurance and mortgage unemployment insurance. When buying your policy, make very sure that it covers everything that you need it to. Do this by carefully reading the actual policy, not just the brochure or promotional literature that advertises it.
If you do you homework when buying your policy, mortgage protection insurance can provide you with the comfort of knowing that you and your family will be able to keep your home, no matter what comes your way.
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