Mortgage Protection Guide
There are 3 main types of mortgage protection: protection against death (mortgage life insurance), protection against disability (mortgage disability insurance), and protection against unemployment (mortgage unemployment insurance). Here is some more information about these different types of mortgage protection and how you can take the steps you need to start safeguarding your family's financial future.
Consider mortgage life insurance protection to be a life insurance policy for your house. Mortgage protection is an insurance policy that pays off the mortgage on a house in the event the mortgage holder dies; this should not be confused with PMI, which is private mortgage insurance that protects the lender should the homeowner default on their loan.
There are also options for coverage of the mortgage payments should the mortgage holder become too ill to work, lose a job, or become injured. This coverage is similar to long-term disability and only lasts for a specific amount of time. The length of time is determined by how much coverage the mortgage holder chooses. To compare price quotes for mortgage payment unemployment insurance then click on the tool at the top of the page. To view mortgage life insurance quotes then click on the quote box on the right side of the page. Get started protecting yourself today!
Who Should Choose Mortgage Protection
If you are wondering if you should choose mortgage protection, then you need to ask yourself a few questions.
- Who are you leaving your debt to?
- Can your family afford paying the mortgage without your income?
- Do you have enough life insurance to cover the mortgage in the event of your death?
- How many years are left before the mortgage is paid off?
- Can you continue paying your mortgage if you are out of work for an extended period?
- Can you afford the monthly mortgage protection premiums?
If you are concerned about your family's ability to continue making mortgage payments if you die or are injured, then you should seriously consider a mortgage protection option.
Who Qualifies for Mortgage Protection
Almost everyone who pays a mortgage qualifies for mortgage protection; however, there are some stringent rules that apply to applicants that determine how much the monthly premiums are going to be. Also, almost anyone who has a full time job can qualify for a second type of mortgage protection (mortgage unemployment insurance) which will pay out a cash benefit (to be used for making mortgage payments or anything at all) if the policy holder should become unemployed. Here are some things that are considered by the insurance company if you would decide to apply for the first type of mortgage protection (mortgage life insurance - which is really just term life insurance):
- Age of mortgage holder
- Gender of the mortgage holder
- Length of time before the mortgage is paid off
- Health of the mortgage holder
- Amount of the total mortgage
Although a physical is not required when applying for mortgage protection, if the mortgage holder dies and their medical records show that they mislead the insurance agent regarding their health, then it is very possible that the insurance company will not pay the benefit to the recipients of the policy.
How Mortgage Protection Works
The most common way that mortgage protection works is when someone purchases mortgage life insurance. However, keep in mind that you can also purchase mortgage protection that will pay out a cash benefit if you should become unemployed or disabled as well. Mortgage protection will pay out to your family (or beneficiary) the total amount owed on your mortgage in the event of your death. It is important that you understand that the benefit is not the value of the home, it is the total amount owed.
In order for a homeowner to purchase mortgage protection, most insurance companies require that the insurance be purchased before escrow closes on the home. This ensures that the mortgage holder does not purchase insurance in anticipation of an illness (a diagnosis at a later date), or becomes injured and then attempts to purchase insurance.
The insurance rates vary between insurance companies; some start the premiums at a higher rate and then reduce the rate as the mortgage value lessens. Others offer the same premium throughout the life of the mortgage loan; however, they determine the total cost and then divide it by the life of the loan, offering a premium that is the averaged out total.
For example, if the total premium for a thirty-year loan is $4,000, then company one might start the rates at $20 a month, however by the last year of the loan the premium might be $4 a month. Company two would divide the $4,000 by thirty and charge a premium of $11 a month for the entire length of the mortgage loan.
Not all insurance companies offer the same rates and benefits. Some will reimburse the homeowners the total amount of premiums paid in, should the mortgage be paid off early, or the mortgage holder does not get ill or die during the life of the mortgage. This makes it a risk free investment. However, the premiums for a company that offers this option are often higher than those that do not.
Finding the Best Mortgage Protection
Should you choose to purchase mortgage protection, ensure that you compare rates at multiple companies and take the time to understand everything that is being offered to you. It is important to you and your family that you purchase the best mortgage protection possible. Remember the 3 main types of mortgage protection: mortgage life insurance, mortgage unemployment insurance, and mortgage disability insurance. Take the steps necessary to protect yourself and your family today!