Mortgage protection (MP), sometimes referred to as mortgage arrears insurance, is the type of life coverage designed to cover your mortgage should you die and no one else would be able to continue making payments on the mortgage. MP is usually purchased by those who own their home and are behind in their mortgage payments. It is generally advised that this coverage be purchased only if you can truly afford the monthly payments, otherwise you may end up losing the house and losing all your hard-earned money. The mortgage protection is usually purchased with the assistance of an agent or broker. There are many things to know and understand about mortgage protection before purchasing it.
First, you need to understand how mortgage protection works and what it offers. Basically, in order to get a mortgage protection policy, you will be putting up some of your assets as collateral. Your mortgage protection insurance policy will then pay off any loans that you are unable to pay for the rest of your life. MP will either pay off the loan itself or allow the person to borrow another loan at a cheaper interest rate. In either case, the life insurance policy is protecting your family’s future from a bad financial situation.
When you start looking at the different options available to protect your mortgage payments and the value of your home, you will find that there are three main types of mortgage protection cover. These include the standard insurance plan, whole life insurance and universal life insurance. With some plans, you can also choose to add in accidental death and dismemberment insurance, which pays off the mortgage and funeral expenses. However, these options will raise the premium cost significantly.
When you are looking at the different options for your mortgage protection, you will find that the cheapest premiums are usually provided by term life insurance plans. Term life coverage has a set limit as to how much it will pay out over the course of the plan. The amount of coverage provided is generally equivalent to the amount of life you have left on your policy. This type of plan typically expires when you reach the cap. However, you can extend the term life policy if you feel that it is sufficient enough to protect your finances in the event of a serious financial situation.
Whole life insurance policies to pay off the mortgage and the loan for the beneficiary. However, you will still need to pay regular monthly premiums for the term of the policy. Premiums will vary depending on the age of the borrower and the amount of coverage that are desired. For people that do not have any dependents, a term life insurance policy may be adequate to help bail them out if they were to die unexpectedly.
Another option that you may want to consider is a combination of both types of coverage, which is known as mortgage protection insurance and universal life insurance. An MPI policy will pay the mortgage while the benefits are paid to the beneficiaries. If you do pass away, the MPI policy will automatically provide lifetime income coverage and disability benefits to your family. However, the premiums paid on an MPI policy are usually more than what you would pay for a traditional life insurance policy, so the premiums can become quite expensive.
If you need more than mortgage life insurance coverage and enough coverage to cover the mortgage in the event of your death, you may want to consider an MIP or mortgage universal life policy. These types of policies are similar to an MPI policy in that they provide coverage for mortgage life loans and will pay off the mortgage in the event of your death. However, an MIP pays more premium than a term policy because it provides more protection. A term policy only covers the interest portion of your mortgage loan while an MIP pays off the mortgage and also provides coverage for any property owned by the policyholder. However, an MIP does not pay off the entire mortgage.
Mortgage protection plans are often best purchased from a financial institution where you maintain a mortgage balance. You should also shop around and compare rates from different lenders to get the best deal possible. Most lenders offer free mortgage protection quotes through their websites. In some cases, if a borrower has less than twenty percent down payment, the lender may offer a reduced rate on the protection as a way to entice borrowers to purchase insurance from them.