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Mortgage Payment Protection Insurance

July 4th, 2009 7 comments

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

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Creative Commons License photo credit: fr1zz
  • 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.

Mortgage Protection Insurance

July 2nd, 2009 1 comment

Mortgage protection insurance covers your mortgage payments in the event of death or inability to earn wages due to involuntary unemployment or health problems. The most basic form is the mortgage life insurance which pays out the mortgage balance lump sum amount to the beneficiary. Then there are various flavors added such as disability rider, unemployment cover, critical illness etc., so that you will have a comprehensive coverage if you desire.

The idea is to protect our house from the lender when you are not able to make payments. MLINS09©

Mortgage protection insurance and mortgage life insurance are same products but marketed with different names to have a different appeal to the consumers. Please refer to mortgage protection insurance article to learn the consumer needs, eligibility terms, policy restrictions and the major insurance providers. In this article, we list the major types of mortgage protection insurances.

Types of Mortgage Protection Insurance

Insurance and financial products used to be simple and easy to understand. Not any longer. Life insurance comes in many flavors (whole life, term life, universal, return of the premium etc.) and so does the mortgage life insurance. There are specific types of policies to cover the life risk, disability, critical illness, and unemployment risks. More choices are always good for you, provided you understand them clearly and have the tools to help you choose the right product or a combination of right products. Broadly speaking, there are four broad types of mortgage protection insurances each explained here separately.

Mortgage Life Insurance

This is the most basic form of mortgage life insurance which covers only the life risk. The policy holder will insure his mortgage and a designated nominee will be the beneficiary. In an unfortunate event of death, the insurance will pay off the mortgage fully and the beneficiary (generally the spouse) will own the house with no obligation to make monthly payments. Generally, the mortgage lenders offer this kind of insurance and the premium is added to the mortgage payments. However, note that insurance premium will be a lot cheaper if you shop around and choose an independent insurance provider, instead of going with the mortgage lender or with the mail offers. Borrowers aged between 16 and 64 years can purchase this insurance.

As an alternative, you can buy term life insurance for bigger amount that covers the mortgage as well as your living expenses. In any case, the premium paid will be lost if you stay alive after the policy maturity, unless you buy Return of the Premium policies which will refund the premium paid along with interest. However, such whole life policies tend to be more expensive since the insurance company will have pay you either ways.

The next 3 types of policies are add-on products that could be attached to the mortgage life insurance. These are called covers or riders which are basically additional clauses in the insurance to cover extra risk.

Mortgage Disability Insurance

While the mortgage life insurance pays off the mortgage fully, the mortgage disability insurance will just pay your monthly mortgage payments when you become disabled. The coverage will be for short term only. The insurance company will make monthly payments on your behalf for up to 3 years or until you recover from the disability, whichever occurs first. The disability insurance rider can be added to the life insurance so that you will have a comprehensive coverage with a single policy. While other kinds of insurances cover death, job-loss etc., this insurance will cover disability and come to your rescue when you cannot work due to physical conditions. You are buying the peace of mind knowing that you do not need to worry about your mortgage payment during disability. This is kind of insurance is offered by your employers as well and the premium tends to be cheaper and comes with an option to increase the coverage based on your needs. To learn more, check Mortgage Disability Insurance article.

Unemployment mortgage protection insurance

Losing your job is a painful experience, more so if you do not have emergency finds to take care of your living expenses and mortgage payments. In the event of a job loss, you are eligible to receive assistance from the State unemployment agency, but those benefits will not be enough to cover even the living expenses for most people. You want to protect your house so that you don’t need to vacate your home for failing to make monthly mortgage payments. House foreclosures, short sales will have adverse effect on your credit history and should be avoided at any cost. That is where unemployment mortgage protection insurance will help you make mortgage payments while you are unemployed.

Based on your need, job-loss mortgage protection policies can cover all or part of your monthly mortgage payments. Such policies will cover a maximum of 6-8 months of monthly payments in a year. Most policies do not pay until 30 days after you are laid off and may require you to show proof of unemployment. Many unemployment insurance policies do not provide coverage for the first 6 months of the policy period. This clause is added because insurance companies want to avoid those who sign up for a new policy when lay off in the company is anticipated. Refer to unemployment mortgage protection insurance article to better understand such restrictions.

Mortgage Critical illness Insurance

Just like unemployment insurance, critical illness insurance will also pay the benefits to the insured, not to the beneficiary. You will be insured against sever health conditions such as stroke, heart attack, kidney failure, cancer etc. among several other diseases listed by the insurer. If you are critically ill, the insurance will make a lump sum tax free payment to pay off your mortgage or other liabilities. Only those health conditions pre-approved by the insurer will be covered, but most companies cover the major diseases.

Critical illness insurance is popular in Europe and Australia, but is also gaining popularity in United States. Most policies require that the insured person survive a minimum survival period, generally about 30 days. You can get critical illness cover for the mortgage or for the life, in which case the lump sum amount can be used for other purposes including mortgage payoffs. You can expect to go through thorough medical exam when you apply for a policy to make sure there are no pre-existing conditions. Your premiums may be higher if you have a family history for any of the listed diseases.

You will be able to add critical illness cover to your mortgage life insurance so that one policy will provide all the coverage.

Mortgage protection insurance is different from Private Mortgage Insurance (PMI), which provides insurance protection to mortgage lenders. You will pay insurance premium for PMI when you are buying a house and do not put 20% down payment. This insurance will protect your mortgage lender in case you cannot make payments and lose the house.

Mortgage Life Insurance Companies

May 24th, 2009 3 comments

Mortgage life insurance protection plans are not actively advertised by major insurance companies although they provide some kind of mortgage protection or life insurance. One of the reasons for this is that the companies probably want to simplify their offerings. They offer the coverage mortgage protection plans through their term life or whole life policies instead of directly marketing mortgage protection insurance plans to the consumers. MLINS09©

If you are unsure what kind of mortgage protection you need, please refer to mortgage protection insurance which helps you understand different kinds of insurance policies available to you. First, decide what kind of insurance policy you need, instead of contacting the insurance agent directly. Some commission based agents may push sell you the plans that you may not be optimal to your situation. If you are unable to decide, you can at least get knowledgeable about all plans and ask the right questions when you contact the insurance agent.

As always, do your due diligence before you buy the policy. It is a good idea to buy the coverage from a reputed company even though it costs little more. Compare rates, get price quotes and make sure you check BBB ratings before you write a check. Finally, ensure your living will is updated with this policy information.

Mortgage Life Insurance Company Choices

Here is a list of major insurance companies that offer specialized mortgage life insurance plans. This is just a starter if you are not sure where to go and is not meant to be an exclusive list of mortgage insurance companies.

State Farm

state farm insurance
State Farm is one of the leading insurance providers in US and Canada. Founded in 1922, the company now offers life insurance, auto insurance, and banking services. State Farm’s 17,700 agents and 68,600 employees serve 81 million policies and accounts – more than 78.7 million auto, fire, life and health policies in the United States and Canada, and more than 1.9 million bank accounts. State Farm Mutual Automobile Insurance Company is the parent of the State Farm family of companies. State Farm is ranked No. 31 on the Fortune 500 list of largest companies.

Nationwide

Nation wide Insurance
Nationwide is one of the largest insurance and financial services companies in the world, focusing on domestic property and casualty insurance, life insurance and retirement savings, asset management and strategic investments. The Nationwide family includes many affiliate companies covering life insurance, financial services, property and casualty insurance and asset management.

Over the last 80 years, Nationwide has grown from a small mutual auto insurer owned by policyholders to one of the largest insurance and financial services companies in the world, with more than $135 billion in statutory assets.

All State

All State Mortgage Life Insurance
The Allstate Corporation is the largest publicly held personal lines insurer in the United States. Allstate sells 13 major lines of insurance, including auto insurance, home insurance, life insurance, and commercial insurance. Allstate also offers retirement and investment products, and banking services. Its advertising campaign is centered around its “Your Choice Auto” product, which offers accident forgiveness and lower deductibles.

NAA Life

NAA Life Mortgage Life Insurance
NAA life is not an insurance company, instead it provides you assistance with buying insurance. They represent number of insurance companies and financial products, not limiting you to a single company’s products. NAA Life offers financial products that will service your needs and are cost effective. NAA Life –