Mortgage Protection

Mortgage Protection Insurance

If something happens to you, will your spouse be able to make the mortgage payments on just one income? How can you protect your family from losing their home?

Think about it. When you’re trying to plan for any unforeseen events, you have many factors to consider from medical and funeral expenses to loss of income. So of course, you would also
want to ensure that your family won’t be uprooted from their home. This is where a mortgage protection policy provides some security.

What is Mortgage Protection Insurance?

Mortgage protection insurance encompasses what the term basically says. This type of policy covers your mortgage payments in the event the main wage earner of the family passes away.
In some cases, the policy also covers your mortgage payments temporarily if you suffer an accident that renders you disabled or if you lose your job. Ideally, this protects your family from losing the home or having to sell it should this catastrophic situation occur.

How Does Mortgage Protection Insurance Work?

Basically, you purchase this policy for a predetermined timespan and pay a monthly premium just as you would a term life insurance plan. However, mortgage protection differs from term life because the payout goes directly to your lender instead of your spouse or any other beneficiary. This allows for your mortgage to be paid off without adding any financial burdens to your family.

Although the death benefit decreases over time since it’s tied in with the balance of your mortgage loan, the premiums won’t increase which is another aspect to consider. Likewise, the policy will expire if you outlive the timespan for which it’s purchased or if you pay off your mortgage before the end of the policy’s term.

Is Mortgage Protection Insurance the same as Private Mortgage Insurance?

While it might be easy to mistake mortgage protection insurance as being similar to private mortgage insurance or PMI. However, the two possess very distinct purposes.

PMI pays the mortgage company if you discontinued making payments. So, its policy protects only the lender and not the policy holder. Furthermore, PMI doesn’t take the place of your monthly payments. So, in other words, if you die or become disabled, you’re still responsible for the mortgage and can even go into foreclosure if you’re not able to meet this obligation because all benefits from the PMI policy go straight to the mortgage company and not to your family.

Another major difference is your lender might require you to purchase PMI if your down payment is less than 20%. On the hand, mortgage protection insurance is entirely optional.

When is Mortgage Protection Insurance not the Best Option?

When you’re trying to figure out is mortgage protection is the best option, as opposed to term life insurance, you might need to look at the big picture when it comes to your monthly expenses and the amount of debt that you’re carrying. The reasoning behind this is because the term life benefits go straight to your beneficiary who can then apply them toward other loans, tuition, and so forth. So, one option might be more ideal than the other depending on your situation in life.

For the most part, your home is your most substantial asset and expense. Therefore, exploring
the option of a mortgage protection policy would be well worth your time in order to gain peace
of mind for yourself and your family.