According to a study by Experian, 73% of consumers die with debt.
And on average, the balance that's most often left behind is about $61,554. This amount includes mortgage debt, but without those loans, it was brought down to $12,875.
If you pass away with a family or spouse that is financially dependent on you, it is highly likely that they will not be able to afford the mortgage payments that will continue once your gone. As a result, it's common for families to have to vacate their homes.
Luckily, with some planning, you can ensure that your family is well taken care of should a tragedy occur. This is where mortgage protection insurance becomes extremely beneficial.
If you want to learn more about this protective measure, you're in the right place. Continue reading this article for all the details you need!
What is Mortgage Protection Insurance?
Mortgage protection insurance is a type of life insurance that is set in place to pay the amount that's owed on a mortgage if a homeowner passes away. This is an especially important type of insurance to have for households that rely on two incomes so that the surviving party isn't burdened with paying the house off on their own.
This type of policy is designed to last for the duration of your mortgage term. For example, if you sign a mortgage for a period of 30 years, your mortgage protection insurance will have to last the same amount of time.
With that said, you are not locked into the insurance policy. If you find one that is a better deal or your situation and your needs change, you can switch to another policy with a different insurance agency.
Should You Purchase Insurance from Your Mortgage Lender?
A misconception about mortgage protection insurance is that it has to be purchased from your mortgage lender at the time you buy your home.
But the truth is, you're allowed to shop around for the insurance that works best for you, even if your mortgage lender has options available. It is also important to note that a mortgage lender cannot deny you of a loan simply because you have chosen not to use them as your insurance holder.
However, making arrangements for your mortgage protection insurance with your mortgage lender has its conveniences. For instance, it's possible to bundle your insurance premiums with your mortgage payments.
On the downside, should you choose to go this route, you may have problems if you make changes to your mortgage later on. Refinancing your mortgage or moving it over to another lender will cause your insurance coverage to stop as well.
So, if you think that is something you might do, it's best to purchase insurance through a third party.
Benefits of Mortgage Protection Insurance
Now that you know all about mortgage protection insurance, here are some ways you can benefit from using it.
1. The Money is Used to Protect Your Assets
If there is money left over after your mortgage has been paid, the remaining balance will be paid to your estate. This can help protect your family from suffering financially if you are no longer here. Especially if you are the primary breadwinner.
2. Life Insurance Isn't Enough
Yes, it is true that mortgage protection insurance falls under the life insurance umbrella. However, they serve two different purposes.
Life insurance is typically paid out to your dependents in a lump sum. Meaning the funds can be allocated in any way they see fit.
Whereas, mortgage protection will cover your biggest bill, your mortgage before anything else.
3. It's Easy to Obtain
Sometimes a decent life insurance policy is difficult for people in poor health or of a certain age to obtain. With mortgage protection insurance, minimal questions are asked during the application process that can prevent you from getting the coverage you need.
4. There's Room for Versatility
In the majority of cases, traditional life insurance policies will not benefit you or your family without the event of your death. But the majority of mortgage life insurance policies offer coverage in different scenarios.
For example, if you aren't able to work due to a disability illness, it is possible that the benefits of your mortgage insurance can take effect while you are still here.
5. Flexible Payment Options
There are usually multiple payment schedules you can choose from when opting for mortgage protection insurance.
It is common for companies to allow you to choose between paying your premiums either each month or quarter. There are also options to maybe payments annually and semi-annually.
6. No Surprise Payments
With most mortgage protection policies, the amount you're responsible for paying will remain the same from the time you buy the policy until your mortgage is paid off. This means you won't ever find yourself caught off guard by surprise fees or raised payments.
7. Protection Without the Guesswork
One of the biggest benefits of a mortgage protection insurance plan is that you don't have to worry about guessing whether or not your mortgage will truly be covered when it is needed most. The reason is, your insurance policy is designed to perfectly line up with the remaining balance you'll need to pay on your mortgage.
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Because it is easy to obtain, affordable, and versatile, there is no reason to not have mortgage protection insurance. It is the best way to make sure your family and your home are well taken care of if, at any point, you aren't around to continue supporting them.
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