If you have taken out a mortgage recently, you will probably have been pitched mortgage protection insurance.
There are a number of different forms that this can take, but generally it will cover your home loan payments in the event that you become disabled or unemployed. Should you die, some mortgage protection plans will pay off your mortgage posthumously.
But is mortgage protection insurance something that you need? Or is it just going to be another fee to pay to your bank? The answer to that question is not straightforward, whether mortgage protection insurance is appropriate for you will depend upon your current health and financial situation, as well as your wishes after you die. Here is everything that you need to know in order to make the right decision for you regarding mortgage protection insurance.
What is it?
Mortgage protection insurance is a form of life insurance. As with life insurance, the kind of policy that you are offered will depend upon your individual circumstances and current health condition. While most mortgage protection plans are designed to cover individuals in the event of death, others will kick in if the policy holder becomes disabled and unable to work. Should either of these happen then, as per the policy, the insurer will pay the mortgage company directly.
Mortgage providers, such as AAG Reverse, sometimes offer their own protection plans. But they can also be purchased from third-party providers.
The obvious advantage of taking out a mortgage protection insurance policy is the peace of mind that it offers. Unlike with full life insurance, mortgage protection plans are issued on the basis of what is known as a ‘guaranteed acceptance’. This means that there are only a few questions asked of applicants which might lead to them being denied coverage.
Mortgage protection insurance is a particularly popular option for those who work in high-risk occupations. For example, many manual laborers, such as roofers, find it difficult to obtain other forms of insurance, especially that will cover them in the event of disability. By contrast, there are few people who would be denied their mortgage protection insurance application.
If you already own your home outright, then clearly there is little benefit to taking out any kind of mortgage insurance. Mortgage payment insurance also belongs to a type of policy known as a declining-benefit policy. This means that, even though you will be paying a set rate for the lifetime of your mortgage, the payoff amount continually decreases with each payment.
Some people are unable to pursue the usual options of disability or life insurance, for example, because they have a pre-existing health condition or a dangerous job. For these people, mortgage protection insurance can offer some similar securities.
If you think that mortgage protection insurance is the right choice for you, make sure that you shop around and don’t just purchase the first plan that is put in front of you. Make sure to ask about the features and pricing for each policy as some of them can be converted into full life insurance plans.