Should I Consider Mortgage Protection Insurance?
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Do you have a mortgage on your home? Chances are that you’ve had plenty of mortgage protection insurance offers if you do. It can be difficult to know what to take seriously and what to throw out when you’re overwhelmed with this mail. Why would you need mortgage protection insurance anyway? You can decide if you need this kind of insurance by answering a few basic questions.
What Is Mortgage Protection Insurance?
Mortgage protection insurance, generally speaking, will cover part, or all, of your monthly mortgage bill. This is in case you lose your job or become disabled and can last up to a certain length of time. Most policies can pay off the entire loan if you pass away. The policies can be very different from one agency to another.
Mortgage protection insurance costs differ from one person to another. It is based on:
- Your age
- Your health
- The value of your home
- Your regular payment amount
- The payoff amount of the mortgage
The policies make monthly payments if you get a disability. Because of this, your price is greatly influenced by the industry you work in. For example, a roofer has a higher risk for disability than an accountant does.
Mortgage protection insurance and private mortgage insurance are not the same thing. Private mortgage insurance protects the lender if you default on the mortgage. Mortgage protection insurance protects you, the borrower.
Benefits of Mortgage Protection Insurance
Some of the benefits of purchasing mortgage protection insurance are:
- Age and pre-existing medical conditions don’t matter as much: Mortgage protection insurance is a great option if you can’t get life insurance.
- Peace of mind: You never know if you will need to use the insurance. This safety net can give you peace of mind so you don’t have to stress about your payments.
Drawbacks
Here are the main drawbacks for you to consider:
- Maximum payment limitations: Your policy won’t provide an amount of money equal to your monthly wages if you lose your job. What you do receive will be a set amount or percentage defined in your contract.
- Balancing your budget: Mortgage protection insurance might not be worth the commitment if you have a very low mortgage payment. Having an emergency fund should give you enough of a safety cushion to make your monthly payments in the case of unemployment or a disability.
- Declining value over time: If you were to take out a life insurance policy worth $200,000, your heirs will receive $200,000. It wouldn’t matter when you pass away. Mortgage protection insurance, on the other hand, will only cover the payoff amount on your mortgage. This amount will go down as you pay it every month. You’ll also still be paying the same premium despite that decreasing payoff amount.
Finding the Right Plan
You should look into mortgage protection insurance policies if you:
- Have a high-risk job
- Health concerns that finding life insurance or disability insurance difficult
Make sure to take your time and shop around before making a decision. You need to know all the details of a policy before you commit to it. Soo good questions for you to ask are:
- What does the policy cover?
- What is the monthly cost?
- When would the policy payout?
- What kind of payout you can expect?
- Any other features that are important to you and your family
Contact Affiliated Home Solutions to learn more about insurance policies you might want to consider after the purchase of your home.