Chances are, if you pay a mortgage, you also receive offers for a mortgage protection insurance. This kind of insurance typically covers the loan if you become disabled, you die accidentally or you lose your job all of a sudden. But the question is, would it be beneficial to have a mortgage protection insurance? Or is it just a company’s gimmick to siphon big amount of money from you?
Well, the answer greatly depends on your financial situation and your plans for the future. If you want to have a better understanding on what it is like to have a mortgage protection insurance, here are its pros and cons, as well as the tips for getting the right policy.
Understanding the Mortgage Protection Insurance
A mortgage protection insurance is simply a life insurance that compensates your mortgage in case tragic events take place. The cost may vary on certain factors like age, health and amount of mortgage but it serves one purpose, which is to protect the owner from financial debt and homelessness.
If you have a mortgage protection insurance that pays your mortgage when you die, the company will immediately send a check to the bank where you have the mortgage, leaving the heirs with a house that is unencumbered by mortgage. On the other hand, if you lost your job or you had a disability, the insurance company will pay directly to the mortgage company as well, but it will take a year or two to process. Nevertheless, the policies for disability and job loss only pays the principal amount and interest on the mortgage and not to other related expenses like the homeowner’s association fees.
Benefits and Drawbacks of Mortgage Protection Insurance
Mortgage protection insurance is often given on a guaranteed acceptance basis. If you apply for one, few questions will be asked by the company to get a coverage. This is beneficial for individuals who are insurable at a high rate or uninsurable because of certain circumstances. They do not need to go through a rigid process to get a mortgage protection insurance because it is made available for everyone. However, a mortgage protection insurance is a declining benefit policy. This means that its payoff amount decreases as the mortgage amount goes down, despite the fact that you pay a set premium. Nonetheless, it is not a good move to wipe out a mortgage protection insurance because it is helpful in case something unexpected takes place.
Choosing the best Mortgage Protection Insurance
Purchasing a mortgage protection insurance is a smart choice if you have a risky job or a health condition that makes life or disability insurance too expensive or unavailable. But before signing in, you have to shop around to obtain the best policy. Ask for the features and price of every MPI you encounter and investigate the financial condition of the insurer. It is very important to assess and differentiate every company in order to know whether you get the best benefits in the long run. A mortgage protection insurance should not only protect you from tragic events, but it should also save you from expensive costs.