How Mortgage Protection Insurance Benefits Homeowners

June 11, 2021

One of the biggest expenses that most families face is their mortgage. As a homeowner, you want to make sure that this asset is protected, no matter what life brings. Mortgage protection insurance is an affordable solution that provides financial security and peace of mind for homeowners.

What is mortgage protection insurance?

Mortgage protection is a type of term life insurance that is designed to cover the cost of your mortgage payments if you were no longer able to pay them. Instead of burdening your loved ones with your mortgage payments, this insurance could cover these costs if you were to pass away.

Any sudden loss of a loved one should not be coupled with financial hardships, and mortgage protection can help make a difficult time less stressful.

How does it work?

Once you qualify, you’ll pay premiums towards a specific amount of coverage that is calculated based on your age, health, and the value of your home. If you pass away while the policy is in force, the insurance company would provide your family with the amount needed to pay off your mortgage.

Mortgage protection insurance provides benefits while you are alive

There are several add-on benefits, known as riders , that can be added to your policy to cover illness and disability while your policy is in force. If you were to become ill or experience a disability that prevented you from making your mortgage payments, these riders would assist you in paying off your mortgage, and you could potentially have money left over to cover other expenses including medical costs, a college education, and more.

You also have the option of adding a return of premium rider, which would refund your premiums if you do not end up using the policy at the end of your term. This means that you can protect your loved ones for a chosen term length, then if you don’t need to use the policy, you can get all your money back.

How do I qualify for mortgage protection insurance?

Mortgage protection is one of the easiest types of policies to qualify for, and carriers offering mortgage protection have high acceptance rates.

Most policies involve simplified underwriting, so it is not always necessary to pass a medical exam. This is a huge benefit for young homeowners: If you purchase mortgage protection with a critical illness rider at a young age and are diagnosed with a serious illness later in life, you could still have your coverage to support you in paying your medical and household bills.

Don’t confuse mortgage protection with PMI

Private mortgage insurance , known as PMI, is different than buying mortgage protection insurance. PMI will refund the mortgage lender rather than the homeowner, so if you were to default on your mortgage payments, a PMI would step in to make the payments to your lender.

PMI has nothing to do with death or disability, and this insurance doesn’t protect the homeowner. Mortgage protection insurance, however, is designed to help the homeowner's loved ones pay off the mortgage in the event of death, or support the policyholder if they were to experience a critical illness or disability.

Can I afford to pay for this insurance and my mortgage?

Yes, you can! According to the U.S Census Bureau, the median monthly mortgage payment for most families is $1,100. Premiums for mortgage protection insurance depend on your health and age at the time you apply; assuming your mortgage payment is close to $1,300, you could expect to pay about $60 a month or less for mortgage protection insurance. Most individuals will qualify for a rate as low as $20/month for a mortgage protection policy. If you were to add riders to your policy, such as the return of premium rider, you may end up paying a little more.

Pricing for mortgage protection is competitive and therefore affordable. Many people find that mortgage protection is often much cheaper than purchasing a whole life insurance policy since it only covers a certain period. Considering the affordability and peace of mind you get with this coverage, mortgage protection is a great option for first-time homebuyers.

The bottom line

Mortgage protection insurance not only protects your mortgage payments, but it also protects your loved ones from unnecessary financial burdens. No one knows when unexpected tragedy might come into our lives, and there’s no reason in waiting to cover something as important as your home.

If you would like to learn more and find out how much a policy might cost you, get a custom quote to protect your home and loved ones today!


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