How many things do you worry – er, think – about, each day? 25? 50? 99?
So you’ll probably jump at the opportunity to check at least one of those off your list. Read on…
Think back to when you were involved in the loan process for your home. Chances are good that at some point during those meetings, a smiling salesperson mentioned “mortgage protection”.
With so many other terms flying around during the conversation, like “PMI” and “APRs”, and so much money already committed to the mortgage itself – and the home insurance, and the new furniture you would need – you might have passed on the mortgage protection option.
You may have had (and hopefully still have) a steady job and a life insurance policy in place, so why would you need additional protection? You’re covered, right?
But before we answer that, let’s clear some things up.
Mortgage Protection Insurance is not PMI
These two terms are often used interchangeably, but they’re not the same thing.
Both Private Mortgage Insurance (PMI) and Mortgage Protection are insurance, but they do different things. PMI is a requirement for certain loans because it protects the lender if your home is lost to foreclosure.
Essentially, with PMI you’re buying insurance for your lender if they determine your loan is more risky than average (for example, if you put less than 20% down on your home and your credit score is low).
Mortgage protection, on the other hand, is insurance for you and your family – not your lender.
There are several types of mortgage protection, but generally it can protect you in the following ways:
- Pay your mortgage if you lose your job
- Pay your mortgage if you become disabled
- Pay off your mortgage if you die
Hold up. That sounds like life insurance.
Mortgage protection can cover more situations than a life policy might cover. Life insurance might not be able to help if you lose your job or if you become disabled. Mortgage protection bundles all these protections into one policy – so you don’t need multiple policies to cover all the problems that could make it difficult to pay your mortgage each month. (Hint: A life insurance policy would be a different part of your overall financial plan and often has its own separate goals.)
How does mortgage protection work?
First, many of the roadblocks to purchasing a life insurance policy, such as health considerations and exams, may not be required. (However, check with a financial professional if any of those considerations would apply to your mortgage protection policy, if there are any exclusions, or if higher premiums would be charged if you do have a pre-existing condition before you put a policy in place.)
If you lose your job or become disabled, your policy would pay your mortgage for a limited amount of time, giving you the opportunity to find work or to formulate a backup plan. Accidents happen and people lose their jobs every day. Mortgage protection would be there to help you if you fall.
One more thing…
A mortgage protection policy is a term policy, so you wouldn’t need to keep paying premiums after your house is paid off.
Now that you know a little bit more about mortgage protection insurance, have those 99 worries ticked down to 98? Reach out to me and maybe we can get that number even lower!