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When you purchase a home, you are making a huge financial commitment. Depending on what type of loan you select, you could be committing to making up to 40 years of payments. But what if you suddenly die or become disabled and unable to work? Your mortgage bills will continue to come, but there will be no means of paying them. This can put your loved ones at risk of losing the home—the last thing you would ever want.
Mortgage protection insurance can help your family cover mortgage costs under certain circumstances, so it is important to consider protecting yourself with this type of plan.
Mortgage Protection Insurance is a type of insurance contract that helps your family make the monthly mortgage payments if the policyholder and mortgage borrower die or become too disabled to work. Though, most policies only payout if the policyholder dies.
Mortgage Protection Insurance typically works very similarly to a life insurance policy. You pay a monthly premium, and in exchange, the insurance carrier ensures your protection. If you die while the policy is in term, the policy provider will pay a death benefit that provides your family with the resources they need to make a set number of mortgage payments.
The limitations of such policies vary, but most policies agree to provide coverage for the entire remaining term of the mortgage. To find out exactly what is covered in mortgage protection insurance, contact an insurance specialist.
Here are some other differences between life insurance and mortgage protection insurance.
The beneficiary for a mortgage protection insurance policy usually isn’t a family member. Instead, it will be the mortgage company. If you die, your family doesn’t receive a lump sum of money like they would with a traditional life insurance policy. Instead, the money is sent to the lender directly. This can be a good thing because it can be difficult to budget a lump sum payout.
Mortgage Protection Insurance doesn’t have the same underwriting process as life insurance policies. This can be beneficial if you are sick or you work in a high-risk job. However, it also translates to mortgage protection plans having high premiums that exceed that of traditional life insurance plans. If you are healthy and have a low-risk job, this may mean paying more for less coverage.
There is no requirement that states you must have Mortgage Protection Insurance to own a home. Regardless of what type of loan you have, Mortgage Protection Insurance won’t be legally mandated. But some mortgage companies will require you to have private mortgage insurance, which is a different type of coverage. This usually only applies if you have an FHA loan.
If you think you need Mortgage Protection Insurance, the experts at Overton Agency can help you get started with a free consultation and quotes. Call 501-881-2050!
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