Mortgage Protection Insurance 101
Who needs mortgage protection insurance?
Any new or existing homeowner that has a mortgage – especially new couples. Mortgage protection insurance can ensure your mortgage payments are made and provide you other needed capital in the event of a disability, critical illness, or unexpected death – depending on which insurance protection you purchase. This way, if a spouse was to die, it would leave the other one protected.
How does mortgage protection insurance work when someone dies?
If you purchase life insurance to cover your mortgage debt, the beneficiary of the policy receives a tax-free lump-sum payment equal to the insurance benefit upon death of the insured. The lump sum can be used to pay off the mortgage, or any other way the beneficiary sees fit.
Is it mandatory to have life insurance when applying for mortgage protection insurance?
It is not mandatory to have life insurance under a mortgage protection insurance plan – you can apply only for disability and critical illness insurance coverage.
How does bank mortgage insurance work?
When you get mortgage insurance through a bank, it is ensuring that if anything were to happen to the homeowner, the bank would be protected, and the mortgage loan is repaid. As you pay off your mortgage, the amount owed to the bank decreases alongside it; however, your premiums remain the same. That means you pay the same amount for decreasing coverage. Mortgage protection insurance from an insurance agency, on the other hand, would be cheaper and protects the homeowner and not the bank itself.
Is mortgage protection insurance the same as life insurance?
A comprehensive mortgage protection insurance can include coverage beyond life insurance, such as also including critical illness insurance and disability insurance. Coverage for mortgage protection insurance can be tailored to a client’s need based on desire and budget.
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