The Advantages and Disadvantages of Mortgage Protection Insurance

mortIf you haven’t heard of mortgage protection insurance it is a policy that pays off your mortgage if you happen to die before you have finished paying it off. This is great news for your family because it means they will have a place to live and they won’t have to worry about covering the mortgage. These plans are often offered to you by the bank that you are getting your home loan through, but you should take a moment to see both the good and the bad of these plans before signing up to a program.

 

Your Home is protected

I don’t know about you but one of my worst fears is leaving my family behind with a home that they can’t afford leaving them without a place to live. When you purchase mortage protection insurance you can rest easy knowing that your loved ones will have a place to live no matter what. This is the main reason that people are willing to purchase these policies and it’s a pretty convincing one.

 

Minimal Requirements

Another benefit of this type of policy is that the companies do very little investigating before they decide how much you will have to pay for your policy. What this means for you is that you don’t have to be in perfect shape to get a coverage on your home and you won’t end up paying ridiculous rates either. This means that if you happen to be in poor health you could still protect your house with this form of insurance.

 

Disadvantages

Value Drops over Time

There are a few mortgage life insurance policies that will give your family the full value of the protection regardless of the balance of the mortgage, but these aren’t common. The industry standard for this type of policy is simply pay off the remaining mortgage balance and to call it even. That means that as you continue to pay off your home you are lowering the value of that policy that you are paying for. This isn’t the case with typical life insurance policies that offer a flat rate at any point in the term.

 

You Pay More for Coverage

Compare the actual value of mortgage insurance plans to standard life insurance and you will quickly see that you are getting less for your money. It might make you feel good to know that the house is covered, but does it really make sense to pay more for your insurance when you could be getting a better deal on a different policy that can also be applied to your home if need be?

 

Bundle to Save More

If you have an accounts open at a company already you may be able to save additional money on your policy by working with them for that as well. Many businesses are happy to offer discounts to their members when they decide to sign up for another service. Before you decide on an unfamiliar company to protect your home consider going with one of the companies that you have been working with all along.

 

Shop Around for Good Deals

Just because bundling offers you a discount does not mean that you are getting the best deal out there. It still makes sense to shop around and get quotes from different companies before you decide which policy you are going to go with. If you don’t explore a variety of options you have no way of knowing if you are getting a good deal or not.

 

For many people this type of coverage doesn’t make a lot of sense. While it is good to have peace of mind you will likely be paying more for it than necessary when you rely on mortgage specific coverage plans. Instead of paying to protect your mortgage just factor it into a standard policy and you are likely to save more money. This advice assumes that you are in very good health and that you can get good premium rates for standard insurance. If this is not the case then you should take a close look at mortgage insurance because it could save you money or offer you coverage that you wouldn’t otherwise qualify for.

 

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