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Posts Tagged ‘Mortgage Protection Insurance’

Does Mortgage Life Insurance make Sense?

October 9th, 2012 No comments

Mortgage Life Insurance is vital for all owners of homes, condominiums, and townhouses. This is a specialized version of term life insurance and designed to ensure that the mortgage is paid in case you die. This avoids the prospect of foreclosure, which is what your family may have to face with the loss of a breadwinner.

Mortgage life insurance guarantees that your family can hold onto your home, which you may have by now invested a huge amount on.

How Mortgage Life Insurance Works

Mortgage life insurance protectionMortgage life insurance is a little different than traditional life insurance for the only reason that in the event of your death, your family would not be paid any money directly. Instead, if you were to pass away, the mortgage life insurance company would send a direct payment to your bank that satisfies any extra money owed on our property. This leads to a number of questions that must be answered before understanding the policy completely.

Mortgage life insurance is an elective insurance you can get. You as the mortgagee will be covered and in the event that you expire, the insurance will offer your beneficiaries with a tax-free lump-sum that will be employed to pay off the mortgage.

Mortgage life insurance is offered in different types of life insurance plans. Among the more common policies are:

  • Mortgage protection insurance,
  • Decreasing term life insurance, and
  • Level term life insurance

It may be a better idea to evaluate prices, coverage, and plans when deciding which plan may give all the benefits you want for your family.

  1. Mortgage protection insurance can guard you of your lose your job. It also protects you if you have an accident or become ill that keeps you from working. Your mortgage protection insurance makes sure that payments of your mortgage will still be met. This means that you can concentrate on getting well or getting a new job rather than upsetting about how your mortgage is going to be paid. Even better, this type of insurance is simple and fairly reasonably priced to set up.
  2. With decreasing term mortgage life insurance, the coverage is planned to decrease in the same way that the mortgage amount decreases. As you pay off the mortgage, the sum you owe also decreases and this kind of insurance will cover your debt. This makes the coverage more affordable and it is best as you plan on paying off the mortgage.
  3. Meanwhile, a level term mortgage insurance policy maintains the level of insurance for the entire life of the policy. This is best for interest for interest-only mortgages, where you only pay for the interest all through the mortgage and pay the whole loan at the end of the mortgage period.

Mortgage life insurance is generally in the form of decreasing term insurance, with the amount of life insurance lessening as the outstanding mortgage loan decreases over the years.

Benefits of Mortgage Life Insurance

Advantages of Mortgage Life InsuranceIf you are shopping for a new home, or already possess a home, mortgage life insurance can give you and your family the protection they need to maintain their home, in the event you pass away.

Mortgage protection insurance is not Private mortgage insurance, or PMI. Mortgage protection insurance is used to protect your family and your home. Private mortgage insurance is bought to protect your lender.

With a mortgage life insurance policy, the demise benefit proceeds are used to pay off the remaining balance of your mortgage. In case your mortgage is for 30 years, then a 30 year term life insurance policy may be procured to guard your mortgage.

Even though mortgage protection insurance can be purchased with the idea of paying off your mortgage, many financial advisors may recommend that you think about your entire financial situation, and buy a life insurance policy that takes into account all of your monetary needs for your family.

Additional Benefits

You can also glance into adding more levels of protection for your mortgage life insurance. You can consider:

Permanent DisabilityPermanent Disability:

Pays for the monthly approval for a number of months in the event that you get disabled. The payment is restricted to the maximum number of months or if you pick up from the disability. To know more about disability check out our Mortgage Disability Insurance.

Critical Illness Cover:

Pays a lump sum in the event that you are seriously ill. This cover generally has a list of critical illness and the payment will be upon analysis of an illness that is in the list.

Joint or Single Life Policy:

You have the choice of either offering cover for yourself alone or including your other half in the cover. The policy will disburse if either you or your spouse passes away and then the policy will be ended. In short, the policy only pays one time.

The Best Mortgage Life Insurance Policy

Mortgage Life InsuranceThe best policy of this type is one that comes from a legal company and can be found by browsing through your favorite search engine. Usually you are eligible to apply for this policy at any time but it may be offered to you in some way or form at your closing.

One of the most useful tips to remember is that if at any point you refinance, take another mortgage out or switch your mortgage to another lender. You must reapply for an entirely new mortgage insurance policy as they are only able to insure existing mortgage policies. This type of mortgage insurance applies only to individual mortgages and must be reapplied if you change your mortgage at any given time.

Obtaining mortgage life insurance quotes is the entry for getting started on this coverage and is quite an easy process.

Remember, if you were no longer there to provide for your family, they would not only need funds to pay for the mortgage, but also for other living expenses such as clothing, education, and all of the other items currently accounted in your family budget.

The bottom line is mortgage life insurance not only gives protection for your family, but it also assists them to continue their existing lifestyle in the home they share with you.

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.

Unemployment mortgage protection insurance

July 2nd, 2009 9 comments

In the event of a job loss, you are eligible to receive unemployment insurance from the State unemployment agency, but those benefits are not enough to cover even the living expenses for most people. If you own a house, you want to protect your house so that you don’t need to worry about finding roof to live under and instead you can look for a new job and think about how to pay bills. Unemployment mortgage protection insurance essentially covers your mortgage payments while you are unemployed. The coverage is not on permanent basis. As soon as you find a job or if you exceed the maximum allowed period, insurance will stop paying. MLINS09©

Depending on the extent of coverage you choose, job-loss mortgage protection policies cover all or part of your monthly mortgage payments. Many policies will cover 6-8 months of mortgage 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.

Most insurance companies do not pay if the mortgage owner loses jobs within 6 months of buying a mortgage protection policy. This clause is added because insurance companies do not want borrowers to sign up for a new policy if they anticipate a lay off in the company (without this protection, insurance providers may incur big losses and may have to file for bankruptcy in an economic downturn. In 2008-09 several companies declared bankruptcy or received government bailout funds in order to survive)

La rêveuse
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Policy premium and payout varies based on the insurance provider and your coverage needs. A typical policy that insures $1,000 monthly mortgage payment and covers up to 6 months of payment will cost you about $50. If your payment is $2,000 per month, you will pay a premium of $100 per month. Please note that only mortgage payment is covered by most policies. You will have to pay other expenses such as taxes, utility bills etc.

If the homeowner has emergency funds set aside to cover living expenses and mortgage payments for up to 6 months, then it may not be such a good idea to buy unemployment mortgage protection. However, if the likelihood of losing a job is high OR if you do not want to dip into your savings in such unfortunate events, you can buy this insurance.

In United States, this insurance should not be confused with the unemployment insurance offered by Department of Labor which pays a fraction of living expenses based on credits computed using your employment history. State unemployment agencies do not consider the fact that you have a mortgage or other obligations. The benefits earned are generally not enough to cover mortgage payments.

Difference between Mortgage Unemployment Insurance and Mortgage Disability Insurance

Unemployment insurance pays benefits when you lose your job involuntarily and covers a short period. Insurer generally pays for a maximum of 6 months or until you find a new job, whichever occurs first. Since most people will find a new job within 6 months, you are not likely to make full use of the benefits for the maximum allowed period.

Mortgage disability insurance will make mortgage payments on your behalf, if you become disabled due to an injury or sever health condition. This kind of insurance will generally make mortgage payments for a longer duration than the unemployment insurance. Benefits are paid for up to 2 to 5 years.

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 Disability Insurance

June 13th, 2009 5 comments

Mortgage disability insurance will pay your monthly mortgage payments when you become disabled. These policies will cover your monthly payments for 2 to 5 years or until you recover from the disability, whichever is sooner. You can add the disability insurance cover to your life insurance so that you will have a comprehensive coverage. While other kinds of insurances cover death, job-loss etc., this insurance coverage will come to your rescue when you cannot work due to physical conditions. You are buying a peace of mind knowing that you do not need to worry about your mortgage payment until you return to work. MLINS09©

Superman in a Wheelchair
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The insurance monthly pay out is generally between 60 to 70% of your monthly income. The payment is determined by your average salary, age, and the extent of coverage you choose. In many cases, the payment maximum is set to $2,000 for basic coverage. Review your monthly mortgage related expenses and figure out the amount of coverage you need. These days, most employers offer optional disability protection for a fee and in some cases it might be enough if you are looking for basic coverage.

Long Term Disability Coverage

Most mortgage disability insurance contracts will not cover the long term disability beyond 5 years. Be sure to check your policy to understand the coverage restrictions for long term disability. Most people do not need the coverage beyond 5 years continuously, unless they have terminal illness which is a very rare condition and conditions like that demand better health insurance coverage. Disability insurance will cover your monthly payments including the escrow payments such as county taxes, home owner’s insurance etc. However, the monthly payment you receive cannot not be greater than your monthly mortgage payments including taxes, home owner’s insurance etc.

You can receive disability benefits many times in your lifetime even though cause is same. However there will be restrictions such as 6 months quiet period. You may be permitted to apply for new disability only 6 months after your first disability period. Some companies do not have such restrictions. Check with your insurance provider for more details.

Mortgage Critical Illness Insurance and Mortgage Disability Insurance

While disability insurance and critical insurance are very similar products, there are some differences between the two. Critical illness insurance will pay a lump sum amount and supposed to provide sufficient funds for a longer duration. Disability insurance will pay monthly payments and the coverage will not last longer than 12 months. Disability coverage and premium is based on your work history, salary etc. while the critical illness coverage is based on family medical history and medical exams. The insurance pay out is generally tax free in both cases.

Mortgage life insurance and disability insurance

Mortgage life insurance pays out in the event of a death of the borrower, but may not pay during disability. Disability insurance will complement the life insurance so that you will have complete coverage. Take note that disability insurance cover can be added as a rider (additional clause) to the life insurance so one policy will cover all aspects.

Waiting Periods for Critical Illness Disability Insurance

Many mortgage disability insurance policies will have a waiting period (also called elimination period) ranging from 1 month to 3 years, before they pay your first or subsequent claims. The longer the waiting period, lower is your insurance premium. So by choosing a longer period, you can reduce the insurance costs, but ensure you have enough savings to cover the living expenses including mortgage payments if you are choosing longer periods.

Insurance companies reward you for choosing a longer waiting period so they can avoid those policy holders who purchase mortgage insurance knowing that will benefit from the policy sooner. A person with a critical health condition may buy a policy with immediate coverage is one such example. If you are a healthy person and have enough living expenses covered for several months, then you can save on insurance premium by choosing longer waiting period.

Important things to know about disability insurance

As always, do not choose an insurance product just because it is cheaper than its competitors. Do your research and ensure the company is in good standing and takes care of its customers. You can research online for customer reviews, company ratings, BBB ratings and rip-off reports for any company. Due diligence will pay off!

Apart from fraud concerns there are some important things your need to verify before you cut the check.

  • Some disability insurance policies do not cover the incident if you are already covered by another similar policy. Disability insurance is generally offered by your employer for a group negotiated fee. If you have the coverage from the employer, the additional coverage you buy might not pay out due to this clause. Make sure you understand such restrictions. In some cases you may be better off getting additional coverage from your employer provided disability insurance, which tend to be cheaper if you work for a big company.
  • Some policy terms dictate that you will be paid only if you become completely disabled. You should not choose such policies. Instead, make sure the policy will pay out if you cannot perform your regular work duties due to disability. That means regardless of the level of injury or disability, you will covered of you are not able to earn a living due to your physical conditions.
  • Many of the reputed insurance companies like State Farm offer disability insurance. Start exploring your options from your auto or home insurer first.
  • Review your social security benefits which might be enough if you are looking for basic coverage. Please note that social security coverage tends to be very restrictive and will pay out only when you are completely disabled.
  • Disability insurance is meant for those who are working full time. If you are not on someone’s payroll or running your own business, you may experience difficulties with getting the coverage.
  • The insurance premium is not tax deductible; however, the payout amount is generally tax free.

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 –