Most homeowners who are paying a mortgage can expect to receive offers for mortgage protection insurance. A product that is intended to cover mortgage payments if the policy holder’s death, job loss or disability, mortgage protection insurance is available in several forms. However, many consumers are unsure whether they may actually benefit from a mortgage protection policy or whether insurance companies advertise the product in an effort to extract additional revenue from homeowners.
Advantages
For individuals who apply for mortgage protection insurance, the odds of getting coverage are more or less guaranteed. This may be an advantage for people who have difficulty obtaining insurance due to health issues or because they work in high-risk occupations. Having mortgage protection insurance may offer a sense of relief to those who are unable to qualify for disability insurance or who would otherwise be required to pay prohibitively high premium rates for coverage.
Disadvantages
There are some people who should absolutely not consider purchasing a mortgage protection policy. The most obvious consumers who fall into this category are those who own their home outright as they are not required to make loan payments. Furthermore, the value of mortgage protection payoff decreases as the borrower makes payments on the loan. Homeowners should also consider that, in some cases, paying off the mortgage in the event of a death is less advantageous than allowing the lump sum payment to earn interest in the bank while continuing to monthly payments on the mortgage loan.
Is Mortgage Protection Insurance is a Good Choice?
In deciding whether purchasing a mortgage protection policy is a wise choice, each homeowner must consider his or her financial situation and health. Those who work in high-risk occupations or have difficulty obtaining disability insurance are more likely to see the most benefits from having mortgage protection insurance while those who have other types of coverage that will adequately compensate in the event of a loss of income are more likely to find that a mortgage protection policy is not necessary. Consumers who do decide to purchase a mortgage protection policy should shop around before deciding to choose the insurance their mortgage lender offers. Homeowners should ask about the cost of mortgage protection insurance as well as insurance features, and they should also thoroughly research the financial status of the insurer.
