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Insurance Mortgage Protect Policy

An insurance protection policy, also referred to as Private Mortgage Insurance ( PMI), is a type of protection that many homeowners choose to purchase. Often, the decision whether or not to purchase PMI is not an option because the lender will require that this extra form of protection be purchased. This is particularly true when you pay less than 20% of the cost of the home as your down payment.

PMI is in place to protect the lender, not to protect you or your loved ones. Therefore, while you might think that PMI is an adequate form of Insurance Protection, you are mistaken.

True mortgage insurance is in pace to protect you and your loved ones in the case of your death. Whereas PMI guarantees the lender payment of your loan if you are unable to make your payments and the lender cannot resell your home in order to recoup the full amount of the debt, this insurance pays out the amount of the mortgage to your designated beneficiary. As such, your beneficiary can actually decide to use the money toward other expenses rather than to pay off the loan.

When you take out a protection insurance policy, you will agree ahead of time to the amount of your monthly premiums. The amount of these premiums will not change and you are expected to pay these premiums throughout the life of your loan. Although the amount of your premiums does not change, the amount of money your beneficiary receives does decrease as the amount of money left on the loan decreases.

Who Needs these Life Policies?  

Anyone with a home loan will benefit from obtaining a protection insurance policy. If you are the main breadwinner for your family, however, purchasing one of these policies is particularly important. After all, if you should pass away, your spouse likely will not be able to make the required monthly payments toward the home loan. As a result, your spouse may lose the home.

The same is true if your spouse does work but you need both of your incomes in order to have enough money to pay the mortgage and to meet your other monthly obligations. In order to give yourself and your spouse peace of mind, it is a good idea to purchase a this policy.

These insurance policies are also a good option for those that are in poor health and have difficulty getting approved for other forms of insurance. Since these insurance policies typically do not require extensive health exams, it is generally much easier to get approved for one of these policies.

How Do I Receive the Benefits of a Mortgage Protection Policy?  

The exact guidelines surrounding your life insurance policy will depend on the policy you decide to purchase. Some policies will only pay out in the event of your death. Other policies, however, will pay out if you become terminally or critically ill. If you default on your loan for reasons other than illness, your policy will not pay out the benefits.