Often people get mortgage protection insurance confused with other forms of life insurance. It is important to understand what this type of insurance is, so you will know exactly how you and your family can benefit from it.
The reason for having this type of insurance
Upon your death, this type of insurance will pay your mortgage. In many cases, it will pay off the entire balance owed on the mortgage, so your home will be owned free and clear by your beneficiaries. For a man or woman who has dependents, this can be a gift of love. In the event of your death, the home that shelters your loved ones will be protected and continue to provide them security.
Do not confuse this type of policy with private mortgage insurance
Private mortgage insurance, often abbreviated PMI, is a policy that lenders require borrowers to carry if they have little equity in their home. Typically, if a borrower has a mortgage that is more than 80 percent of the home’s value, they will be required to have this insurance. However, this insurance is to protect the mortgage lender in the case of death of other reasons for non-payment. Your family will get nothing if you should die. Many people consider PMI to be unnecessary for the homeowner, and once there is enough equity built up in the home, this insurance is dropped.
A term life insurance policy is not enough
You may already have a term life insurance policy and believe that you have everything covered in the event of your death, but this may not be true. A term life insurance policy is a good idea, but it usually paid in a lump sum. Your beneficiary will have to take part of the money and use it to make mortgage payments. Over time, with less income, your beneficiary may not be able to keep up with the mortgage payments. This can lead to losing the home. A mortgage protection insurance policy will pay off your mortgage in full, and the term life insurance money can go towards living expenses for your loved one. In this way, having both policies makes your family more secure. There is no conflict between the two policies.
You can shop for a home mortgage protection policy and get free quotes on the Internet. One example of a place that offers quotations is at mortgageprotection.com.
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