Mortgage Protection Insurance can offer a homeowner peace of mind. A home is usually the biggest purchase you will make throughout your life. But you might be too distracted by all the ins and outs of purchasing a home to think about protecting that investment of yours.
One way to do this is to purchase mortgage protection insurance. This is insurance purchased by people who are afraid that their unexpected death or illness might leave their loves ones with a heavy burden to bear.
But there’s a lot more to know about mortgage protection insurance before you go out and purchase it for your home. Read on to learn more about this insurance and how it works.
What Is Mortgage Protection Insurance?
Mortgage protection insurance is also known as mortgage life insurance or mortgage purchase insurance.
You purchase this insurance so your mortgage balance can be paid off or paid down in case you pass away unexpectedly or get seriously ill.
Most financial institutions and mortgage brokers offer this type of insurance.
Pros of Mortgage Protection Insurance
There are some pros to be aware of when purchasing mortgage protection insurance.
- Has an easy application process
- Doesn’t require a medical exam
- Easier to qualify for coverage than life insurance
- Lower premiums since it is a group insurance
One of the best things about mortgage protection insurance is that it has a 30-day “free look” period. This means you can take 30 days to think about whether you want this insurance coverage or not.
If you change your mind, you are more than welcome to cancel your insurance policy and get all your premiums back, within the 30-day period.
The biggest benefit, of course, is for your loved ones, who are left behind after your unexpected demise.
If you have insurance payouts from other forms of insurance, they will not have to spend that money on paying off the mortgage. They can instead focus on paying tuition fees, utility bills, or other expenses.
Cons of Mortgage Protection Insurance
One major con of mortgage protection insurance is that since it is related to your mortgage, it ENDS when your mortgage ends.
That’s why some financial gurus say that if you are going to get insurance, it’s better to get life insurance rather than mortgage protection insurance.
This means, if you leave your financial institution to find a better mortgage interest rate somewhere else, your coverage may end as well! This means you may have to secure a new policy.
The thing to remember here is that your mortgage protection insurance benefits will DECREASE over the lifetime of your mortgage, as your mortgage becomes smaller and smaller.
You will be paying the same premiums, but getting fewer benefits.
Remember that, lenders love mortgage protection insurance! Why? Because it protects them and their payouts in case you die suddenly.
How Does It Differ From Other Insurances?
One other kind of mortgage insurance that people would confuse this with is mortgage loan insurance.
Mortgage loan insurance is quite different as it is purchased to protect the lender from the risk of default if you put less than 20% as a down payment or get your mortgage from a private lender.
Many people end up getting life insurance rather than mortgage protection insurance because they don’t want something whose benefits reduce over time and which is connected strongly to their mortgage.
Life insurance, of course, is harder to apply for and get. You have to do a bunch of tests and medical exams. If you are in poor health or have any other medical issues, your life insurance premiums are exorbitantly high.
Life insurance is also not attached to a particular mortgage and doesn’t expire after your mortgage is paid off. It comes in many different terms, so it is much more flexible in the way it protects you.
The one who benefits most from these policies is the lender as they get paid the full mortgage immediately. But in a life insurance policy, the one who benefits most is your loved ones or beneficiaries.
Of course, your beneficiaries do benefit from the, but only indirectly. It’s not like they would get a payment from the insurance company on your demise.
It’s only that they wouldn’t have to worry about paying down a mortgage after your passing. It reduces some financial burden off their shoulders.
Do You Need Mortgage Protection Insurance?
You might be wondering if this type of policy is a worthy investment. There are so many different kinds of insurance out there, that sometimes it can be confusing which one to purchase.
If you are looking for a convenient insurance policy that lines up with your mortgage and doesn’t require a lot of medical exams, then you should go with mortgage protection insurance.
If you know that you have a lot of medical issues and that you would be denied term or whole life, or the premiums would be unaffordable, then mortgage protection insurance is a great alternative.
Some individuals secure protection policies as a way of complementing their life insurance policies.
If the mortgage protection insurance takes care of the mortgage, it means that your life insurance payouts can be used for other things.
Mortgage Solutions You Can Trust
As you can see, there’s a lot to think about here, a lot of options to weigh out, and a lot of pros and cons to consider.
If you are confused about whether mortgage protection insurance is for you, then contact Mortgage Brokers Network and have a conversation with the experts!
We can clarify things for you, educate you on all your options, and help you make the right decision for you. Don’t hesitate. Call now.