Mortgage protection insurance is a type of term life insurance that is designed to pay off your mortgage in the event of your death. This coverage ensures that your family could stay in their home if you were no longer able to contribute to mortgage payments. In this article, we will explain how mortgage protection works , and how it can benefit you and your family.
Mortgage protection insurance is a type of term life insurance and it functions much like other life insurance policies. Coverage is generally affordable: the premium that you pay will be based on the amount of coverage you need (sometimes reflecting the amount of your outstanding mortgage), your general health, your tobacco use and your age at the time you apply for coverage. Some mortgage protection plans offer simplified underwriting, meaning you won’t need to undergo a medical exam to qualify.
Certain policies offer additional coverage that can support you and your family if you were to become critically ill or disabled. Additionally, some policies also offer a return-of-premium feature. This means that if you don’t pass away during the policy term, you could receive a return on the money that you paid in premiums.
If you’ve recently closed on a mortgage or home equity line, you have probably received mail about getting homeowners or mortgage insurance. It can be confusing to sift through all the different types of insurance that are available when it comes to your home, and some policies might be a much better fit than others. In contrast to protecting against damage to your home with homeowner’s insurance, mortgage protection can help you pay off your mortgage if the unexpected were to happen.
According to an insurance barometer study by Life Happens and LIMRA , 54% of people said that the main reason they have life insurance is to help pay off the mortgage. Other reasons include helping replace lost wages or income from a wage earner (67%) and paying for estate taxes (46%). The LIMRA survey also found that life insurance owners are more interested in getting additional protection through other financial products. The findings suggest that “individuals who have both individual and group life own between four and five additional insurance products.”
If you are about to buy a home, or you’re already a homeowner, now is a great time to get mortgage protection coverage.
While mortgage protection is optional, homeowner’s insurance is usually something that homebuyers are required to purchase. This insurance protects your home from various types of damage and protects you against legal liability if someone is injured on your property.
Private mortgage insurance (PMI) is a totally different policy than mortgage protection. PMI is a product that supports the lender if you default on the loan - it doesn’t protect you if something were to happen and you needed insurance coverage.
Mortgage protection functions like a standard term life policy. You purchase a policy for a set period, make monthly payments, and if you pass away while the policy is in force, your policy will provide a death benefit. A mortgage protection insurer will generally pay mortgage payments directly to the lender in the event you pass away.
You can also have the option of adding coverage that would make policy benefits payable if you were to become disabled and could no longer contribute to mortgage payments. If you become disabled, the insurer will make your mortgage payments on your behalf. Note that in some cases, you may still be responsible for other payments (like homeowner’s insurance or property taxes) that are maintained in escrow by your lender.
The main difference between mortgage protection and other life insurance policies is that mortgage protection is focused on protecting your home. Mortgage protection insurance helps your family stay in their home if you were unable to pay the mortgage or you unexpectedly passed away. This can give you peace of mind, knowing that your mortgage payments are covered in the event something unexpected happened.
Keep in mind that mortgage protection is a type of term life insurance policy, so it’s important to understand how term life works in parallel with mortgage protection. Term life insurance is a policy that will be in effect for a certain term: usually ranging from 10-30 years. If you die while the policy is in force, the insurance company will pay the death benefit to your named beneficiary.
Term life insurance provides several additional benefits – most importantly, your beneficiary will have the option to use the death benefit as they deem fit.
If you have ongoing health issues, you might not be able to get a competitive life insurance rate. In this situation, getting a mortgage protection policy could be a viable option, because the underwriting process generally doesn’t require a physical exam.
Even if you have life insurance coverage through your employer, mortgage protection insurance is valuable because it provides benefits that are specifically designed to pay off your mortgage. You can use this coverage in tandem with other life insurance policies - even if you have coverage through your job.
If you are interested in a mortgage protection policy or want to learn more about how mortgage protection can benefit you and your family, your Symmetry Financial Group agent can help. Since Symmetry Financial Group represents over 30 of the top insurance carriers in the industry, our agents can shop around to affordable rates and policy options.
We’re here to make sure that you and your family are protected through life’s ups and downs. Give us a call today to get started or use our online form to request a quote to find the mortgage protection insurance that best fits your unique budget and goals.