When buying a new home you will more than likely take out a mortgage or a loan in order to make your home purchase. So I got to thinking about this very thing. When I bought my last home and took out the mortgage did I even consider the fact that if I was no longer around, how would the mortgage get paid every month?
So this was the question I sought out to get answered. Is Mortgage Protection Insurance worth it?
Here’s what I found out. The first thing that I needed to get answered is, What is Mortgage Protection Coverage? Mortgage protection coverage is the type of insurance that covers your mortgage balance and payments in the event of three things.
- Death of The Mortgagee
- Loss of Employment
Let’s talk about these three areas in detail one at a time.
Death of the mortgagee is probably the most talked-about type of coverage. In the event, you pass away before your home is paid off the MPC (Mortgage Protection Coverage) will assist in helping your family pay off the loan. This will enable them to stay in the property and continue living without any additional disruption.
Mortgage protection insurance, or MPC, is another kind of life insurance. The cost of the monthly premium varies, depending on the amount of the loan and the individual’s age and health. Some MPC policies cover a mortgage if there is a disability, and those premiums depend on the borrower’s occupation.
What If I Don’t Die?
If you die with a mortgage balance and have mortgage protection insurance policy, your insurer pays the remainder of your loan balance directly to the lender. Any heirs, such as a spouse or children, won’t have to worry about making future mortgage payments or losing the home.
MPC policies that pay a benefit for a job loss or a disability typically cover your mortgage payments for a year or two. The policy will spell out if there is a mandatory waiting period before payments are made.
When it comes to mortgage protection coverage it’s important to note that the type of coverage that the actual lender may offer will not offer you the same flexibility that an independent life insurance agent can offer. Most of the plans offered by lenders offer all the flexibility to the lender. An independent agent can and will show you options that will offer lower costs, a term that matches the length of your loan, and the possibility to get all your premiums back if you pay your loan off early.
There are options that would build cash value that you could potentially be used to pay off your mortgage early. There are options that would allow you to access part of the benefit in order to pay for a terminal illness and even pay for nursing home expenses.
What happens if I’m disabled?
Mortgage disability insurance — sometimes referred to as mortgage payment protection insurance — is a type of long term disability policy meant to specifically cover some or all of your mortgage payments if you can’t work due to illness or injury.
Mortgage disability insurance is offered as a standalone disability policy or as part of a broader Mortgage Protection Coverage is essentially a term life insurance policy that covers your mortgage (yes, just your mortgage) if you die, whereas mortgage disability insurance pays your mortgage if you become disabled.
Given mortgage disability insurance is so narrow, people are generally better served by a long-term disability insurance policy, which offers more robust coverage. However, if your budget doesn’t permit the better and more complete option, a policy with the disability rider will be the next best thing.
And Finally, Loss of Employment
Unemployment Protection Insurance, unlike mortgage insurance, is designed to help the buyer rather than the lender. Although it does help encourage reluctant home buyers, so this insurance indirectly benefits lenders as well. Mortgage unemployment protection insurance does what you might think it does – protects the buyer if they are unable to pay their mortgage due to a job loss until they can get back on their feet.
In 2008 -2009 when everything went to the dogs, I’m sure that many people out there wished that they had taken out this type of coverage.
It’s important to know that not all these options are available in all states. You should check with a local insurance professional for rates and options that are approved in your state.
In my final conclusion, I would say that Mortgage Protection is probably worth it. It’s hard to answer this question for you, however, I would say to take a look at the options and see how these options would possibly benefit you and your family.
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