Mortgage Payment Protection Insurance
Mortgage payment protection insurance covers monthly mortgage payments for a short term when the policy holder is not in a position to make payments due to poor health conditions, involuntary unemployment, or physical injuries caused by accident or sickness. Unlike mortgage protection life insurance, MPPI will not pay out a lump sum loan amount, neither does it pay when the insured party dies. MLINS09©
Mortgage payment protection insurance generally covers the minimum mortgage payment for up to 12 months or until the person has recovered from the incident, whichever happens first. This protection is very similar to those credit protection offers you get form credit companies that charge a small fee every month and cover your credit card payments when you are unemployed or suffer from health related injuries. The difference here is that the policy will only cover monthly mortgage payments instead of credit card payments.
Mortgage payment protection insurance is one of the aggressively marketed insurance products around. If you get a sales pitch when you are buying some other assets or loans like mortgage loans, bank loans, property title etc. don’t purchase before you do your research. Such offers tend to be more expensive than those sold through independent financial advisers.
Who needs Mortgage payment protection insurance
- If your company or industry is performing poorly and if you think your job might be impacted, you should consider some kind of insurance protection. However, please note that If your company has already announced lay offs, you may not be able to purchase and then claim the insurance benefits. Insurance companies will not provide coverage in such a scenario. They may also require that you to make at least 3 to 6 months of payment before you claim any benefits.
- If you have a single source of income and have dependents or small children, you may want to consider buying the insurance depending on the macro economic conditions.
- If you do not have sufficient savings to cover mortgage payments and are not certain about the long term job stability, MPPI maybe for you.
- If you have saved 6 to 12 months of living expenses in emergency funds and your job is fairly stable, you may not need the payment protection policy.
Insurance needs vary depending on your personal situation. It is a good idea to consult a financial advisers once in a while to re-asses your insurance requirements including your health insurance. After all, you may just need a mortgage life insurance which is the major living expense you need to worry about.
Mortgage Life Insurance and Mortgage Payment Protection Insurance
The main difference between the two is that mortgage life insurance will have a designated beneficiary who will receive the money to pay off the mortgage completely. Mortgage payment protection will not have beneficiary. Instead, the insurance policy holder will get assistance from the insurance company to make monthly mortgage payments for a short while, typically for up to 12 months. MPPI is meant to provide temporary relief when you are out of work due to sickness or involuntary unemployment. The mortgage payment protection insurance cover can be added to the life insurance so that you will have single policy offering comprehensive coverage.