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If you are a homeowner or considering buying a home, you may be wondering whether mortgage protection insurance is right for you. Understanding what mortgage protection insurance is and how it works is essential to making the decision of whether to make this financial investment. There are many pros and cons to purchasing mortgage protection insurance, so knowing the facts will help you to make an educated choice.
What is Mortgage Protection Insurance?
Mortgage protection insurance will cover you in the event you are unable to pay your mortgage. If you suffer a permanent disability or job loss, the mortgage protection insurance will pay your mortgage until you are able to continue making payments. Some policies will pay off the balance of your mortgage in the event of your death. With mortgage protection insurance, you don’t have to worry about leaving your heirs the burden of paying off your mortgage.
Similar to a life insurance policy, mortgage protection insurance rates are based on factors such as the value of your home, the amount still remaining on your mortgage and the condition of your home. The insurance policy also takes into account your age, health and occupation. Mortgage insurance premiums are typically higher for those that work in hazardous occupations.
Why Buy Mortgage Protection Insurance?
Mortgage protection insurance protects you, allowing you to keep your home in the event of a financial catastrophe. While private mortgage insurance typically protects the lender if you default, mortgage protection insurance will help you to bridge the gap when you are without funds to meet your monthly mortgage obligations.
Mortgage protection insurance policies typically have high acceptance rates. Many homeowners find that they are unable to obtain life insurance and disability insurance policies if they have pre-existing conditions. Since mortgage protection insurance is easier to obtain, they depend on this, rather than disability policies to cover them in the event of financial hardship.
Homeowners who buy these policies purchase them as a safety net that will give them peace of mind. Many people fear that a job loss or on the job injury will throw their lives into chaos. With this safety net insurance, you can rest easy knowing that your family’s well-being will not be affected.
Drawbacks of Mortgage Protection Insurance
The biggest drawback of mortgage protection insurance is that it only pays off a set amount of money when you file a claim. This monthly amount may be less than what you were earning from work, leaving a gap between the amount of the disbursement and the amount of your mortgage. Many claimants have to find supplemental income in order to meet their mortgage obligations.
Another drawback of the insurance policy is that it may not make sense for your budget. If your mortgage payment is low in relation to your overall income, it often makes more sense to simply set aside funds each month and keep them in a reserve in case of emergency.
The value of mortgage protection declines over time. This is because the amount of the payoff is directly tied into the cost of your mortgage, which will decrease over time. Therefore, your premiums will remain the same while the payout amount will be significantly less. Unlike a life insurance policy which has a static value, the mortgage protection insurance policy will become less valuable over time.
If you are unsure of the security of your financial future, have a dangerous job or have trouble getting life insurance, you may find mortgage protection insurance is a valuable addition to your financial portfolio. <br />
Many people use this insurance in conjunction with other investment accounts and liquid assets. While mortgage protection insurance will give you peace of mind, it is helpful to review all of the facts before deciding whether it is the right choice.
Mortgage protection insurance is an umbrella in a time of financial chaos. Find a policy today.