Mortgage Insurance

How Mortgage Protection Insurance Can Save Your Home And Provide For Your Family

It happens all the time.  Out of nowhere catastrophe strikes an unprepared family when the breadwinner suddenly dies.  Left without an income, the family falls into dire financial straits and mortgage payments become harder to make.  Soon, the family cannot afford to pay the mortgage anymore and they eventually lose the house to foreclosure.  This reality has become more frequent in recent years in light of the housing market and recessionary economy.

The sad thing is that this scenario can be easily prevented with a mortgage life insurance policy.  Although the death could not be prevented, the result of the death could have.  The family would be able to keep the house because the insurance would pay off the mortgage balance amount.  With a term life insurance policy with a decreasing cash value that runs in balance with the mortgage principal, the debt will be paid off in the event of the insured’s death.

Mortgage protection insurance is basically a term life insurance policy that is designed for a specific period of time for the purpose of paying off your mortgage or other large debt in the event of death.  The initial premiums are low-priced compared to other life insurance and you can get large amounts of coverage for little money.  Once the mortgage is paid in full if the insured does not die, the insurance stops and the contract is ended.

It is important to understand that mortgage protection insurance is not private mortgage insurance (PMI) that you may have been confronted with when you originally purchased your home.  There is a major distinction between the two.  Many people confuse them because they sound familiar and many think that PMI will pay off the mortgage so that their family can keep the house in case of the death of the insured.

However, this is not true.  Private mortgage protection is for the benefit of the mortgage company so that they, not you, will get the proceeds in the amount of the mortgage principal if you die.   PMI is for the benefit of the lender, even though you are making the premium payments, which allows your mortgage company to finance your home for a lower down payment.

Mortgage protection insurance, on the other hand, is for your benefit.  This is a separate insurance policy on your life that will pay off your mortgage for you so that your family can keep your home.  The mortgage company still gets the proceeds from the insurance in the amount of the loan balance, but the house is your family’s, free and clear.

It is highly recommended to talk with your insurance agent about other provisions of mortgage protection insurance like a job-loss rider, which pays your mortgage payments if you become unemployed, in order to determine the level of protection that is right for you.  You owe it to yourself and to your family to evaluate mortgage protection insurance as an affordable method for ensuring that your family will not lose their home in case the unthinkable happens.

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