Hey, look at you, buying a home! That’s a big step. You’ve gone through an endless amount of paperwork and finally got the keys. Congratulations! Now you’ve settled into your new home and you’ve probably realized that you’re into 50 times more debt than you ever were at all. But is it protected for your family if something happens to you? An unforeseen death or disability could put your home at risk.
So what do you do? Protect it!
Experts say mortgage debt is the best kind of debt you’ll ever be in. As long as you keep making those mortgage payments on time every month, you should be good to go. Here’s the thing though! It’s a good idea to educate yourself about what your options are in the face of unforeseen circumstances. So let’s do that. Mortgage protection insurance is a life insurance concept. It pays off your mortgage in the case of your premature death or disability.
Here’s how it works.
Should you pass away, the policy pays off your mortgage. If you become disabled, the living benefits of the policy will pay part or all of your remaining payments. The benefits are paid out, tax-free. Best of all, some plans offer a return of premium option where if you never get to use the mortgage insurance you get 100% off the premiums you paid, back! Tax-free as well! And it is affordable! With mortgage protection insurance, you can have the peace of mind knowing your family is covered. But how is mortgage insurance different from term life insurance? In both life insurance policies, you will have to keep paying regular premiums to keep your insurance covered. Typically when you buy a mortgage life insurance you do so to protect the income if something happened to you. So if you pass away, you want to make sure that there is enough life insurance to take care of your spouse, that’s going to take care of all your debt including your mortgage, to make sure that she and the kids are taken care of.
So now the question lies, if your term life insurance already takes care of your mortgage debts, then why do you need to buy a separate mortgage life insurance?
Mortgage protection insurance is typically a product that is sold directly from the bank and you’re buying it directly to take care of the house. So as you continue to make payments on your home or on your mortgage, the amount of life insurance declines or reduces over that time frame. But here’s the big kicker. The beneficiary is not your spouse, it’s not your kids, it’s the bank or your mortgage company. So if something happens to you, it goes directly to the bank to pay off your mortgage completely. The advantage of mortgage life insurance is that there is no underwriting involved. You wouldn’t have to go through medical exams and such as with a term life insurance. Like everything else in nature, mortgage life insurance also comes with its own set of advantages and disadvantages.
Pros
It relieves your family from the burden of paying house or mortgage debts in the event of your death. At the time of inception of your policy, there will be no need for any medical examinations or blood samples. This could really benefit a homeowner who is suffering from a serious medical condition and is unable to buy a term life insurance. The fact that mortgage insurance offers coverage even if you are not yet dead but disabled makes it more versatile and gives it leverage over traditional term life insurance that offers coverage only in the instance of your death.
Cons
The benefits will be received by the mortgage company or the bank and not your family or beneficiaries. This means that the policy beneficiary will not be your family but the mortgage lender. This implies that with mortgage insurance you have no control over the insurance settlement received. Mortgage insurance may not seem like a financially viable option especially if you are on a tight budget. You’ll be paying off your house debts as well as paying the mortgage insurance premium at the same time. Having an insurance policy is important. Whether it is a mortgage protection insurance or a term life insurance, that decision is up to you. Weigh the odds and make an informed decision. Your family deserves to be protected! Bought a house and now want to decorate it to make it home? Check out this 5 Tips To Add Colour To Your Home.
