What is mortgage loan insurance?
Mortgage lenders and insurance companies used to offer a product called mortgage protection insurance. Although the actual characteristics varied, most of these policies were some form of decreasing term insurance, intended to repay the policyholder’s mortgage loan in the event of death.
The death benefit for this type of policy was paid directly to the mortgage lender, bypassing the insured’s family. This coverage also declined over time as the mortgage amortized, although the premiums were level for the term of the contract.
Today, providers offer temporary coverage designed to help family members cover the value of the mortgage along with other financial needs upon the death of a loved one.
Mortgage Protection Insurance vs PMI
People often hear mortgage insurance and automatically think of PMI, or private mortgage insurance. However, there are clear and distinct differences between older mortgage protection insurance policies and the PMI coverage required on many mortgages.
Mortgage loan insurance was optional coverage to pay off a mortgage balance in the event of the owner’s death. Private mortgage insurance (PMI) is coverage that mortgage lenders may require if the borrower does not make a down payment of at least 20 percent when purchasing the home. PMI protects the lender, not the borrower, if the debt is not paid as expected. It will be do not pay off the home balance even if the borrower unexpectedly dies.se
What is mortgage loan insurance today
Mortgage protection insurance today is almost impossible to find, at least as a stand-alone policy. Some life insurance companies may offer mortgage protection as an optional rider on life insurance policies, but they are very rare.
In most cases, protecting your mortgage is just one of the main reasons to buy a strong life insurance policy. In fact, insurers will often ask you for your mortgage balance to help you calculate how much term or permanent life insurance to buy.
Term life insurance is often cheaper for many homeowners, while being much more versatile. Rather than paying uniform premiums for a decreasing benefit, as was the case with mortgage protection insurance policies, term life insurance offers uniform premiums for a uniform benefit. Your family will receive the same amount regardless of how much is owed on your home if you die.
Plus, term life insurance gives your family options. If they want to use the death benefit to pay off the house, they can; if they prefer to use that money elsewhere, that is also an option. And if you want refinance your mortgage over the years (without disrupting your life insurance coverage) you can.
What are the expected costs of insurance for mortgage protection?
There are many factors that go into the cost of life insurance coverage, even if you buy it to protect your mortgage. These include the level of coverage (that is, how much you owe for your home), your age, condition, location, and things like smoking or hobbies.
We found that for term coverage between $ 300,000 and $ 500,000 for 30 years, a healthy woman in her early 30s could expect to pay between $ 16 and $ 35 per month.
When is Mortgage Protection Insurance a Good Idea?
If you owe on a mortgage, life insurance is usually a good idea. This is especially true if you have a spouse who would be financially affected by your death and / or minor children to consider.
Even if you don’t have children or a partner, affordable term life insurance can help protect your loved ones in the event of death, leaving them enough funds to pay for your home or simply covering household expenses. ‘registration. and sell the property in your absence.
How we choose the best insurance companies for mortgage protection
To compile this list of mortgage protection insurance options, we looked at 13 of the best term life insurance companies. Like your mortgage, term policies last for a specific period of time and are a more affordable option than permanent policies. Duration is therefore our suggested coverage option for mortgage peace of mind.
In choosing our top picks, we took into account factors such as availability, product features, and included and optional benefits. We’ve compared prices, along with consumer satisfaction and industry third-party ratings, to determine which carriers can give you the most reliable, affordable, and feature-rich coverage available.