Do I Need Mortgage Protection Insurance? Pros and Cons You Must Know

“Do I need mortgage protection insurance?”

Your home is probably one of the biggest and most important assets you have. It is where you and your family bond together after a whole day’s work, and it is the place where you feel most comfortable in the world. And if you’re paying a mortgage, you need to ensure that your home and family is protected should anything happen to you. Life is unpredictable, and it’s very important to be ready at all times. The question is what’s the best way to protect your property?

There are plenty of ways to protect your home, and one way is to purchase mortgage protection insurance. However, with the number of offers coming into your mail, it’s becoming difficult to determine if which of these are serious and which ones are scams. Plus, what does mortgage protection insurance mean, anyway? And how does it work? Would it be beneficial for you and your family?

What is mortgage protection insurance?

Mortgage protection insurance (MPI) is a life insurance that covers your mortgage bills in the event of an accident, job loss, or death. The amount it covers may vary depending on the type of coverage you have. Most of these policies can only cover some of your existing monthly bills, but others can pay off all your entire loans, especially if you are under an expensive type of mortgage policy. Insurance policies may differ from one company to another, so it’s very essential to shop around to be able to get the best fit for your needs.

It is also important to know that the cost of mortgage protection insurance may vary from several factors. As with other forms of insurance policy, the rate is based on your health, age, value of homes, and occupation. Typically, individuals who work on high-risk jobs are subject to higher premiums, since they are at greater life assurance risk. This is the same as with people who have pre-existing conditions and higher mortgage value.

Pros

• Peace of mind. No matter how safe you think you are, accident may still happen in a snap of time. When something happens to you, who will take care of your family? Who will pay for your mortgage bills? Mortgage protection insurance provides you peace of mind. If anything happens to you, your insurance company will send a check directly to your mortgage lender to pay off the amount needed for your mortgage, leaving your family with a home without a debt attached to it.

• Flexible payment terms. Most mortgage protection insurance companies offer flexible payment terms. Depending on the agreement between you and the insurance company, you can pay your premiums on a single lump-sum or annual plan basis.

• Easier to obtain. Unlike health and life insurance, there is a much higher acceptance rate for applying with mortgage protection insurance. Only a few questions are asked during the interview process, which means there are only fewer reasons for rejection.

Cons

• Coverage limitation. Most insurance policies are only limited and don’t pay you the exact amount that you really need. For instance, if you lose your job, your mortgage protection insurance won’t provide you a sum of money that is equal to the amount of your monthly salary. The amount you will receive will be calculated based on your insurance coverage and type of policy.

• Your family doesn’t receive actual cash. Since mortgage insurance policies consider the lender as the beneficiary, the benefit amount is given to the lender and not to your family. The amount paid to the lender is used to pay off your existing debt. This happens in the event of your death.

• Decreasing benefit. Mortgage protection insurance is a declining-benefit policy. This means that even though you pay the same amount of premiums for the life of your coverage, the value of payout decreases as you pay down your mortgage.

Conclusion

By weighing the pros and cons of mortgage protection insurance, you can get an idea whether this type of insurance is beneficial for you or not. If you have a high-risk job, then getting a mortgage protection insurance is probably a smart option. However, don’t make a decision right away, as there are other things you still have to consider. Talk with your partner, get some quotes from different insurance companies, and shop around.

CrockTock.com is a website that focuses on everything that you worked hard for – your finances, investments, and properties. It is also a place where you get valuable information on how to deal with your mortgages and existing loans. It guides you on how to spend and save money.

 

Tags: Mortgage insurance, Mortgage life insurance, Mortgage loan

Category: Mortgage