Introduction to Mortgage Protection Insurance
Planning to buy a house? Have a well paying job and you feel it is the right time to invest in a house of your own? If you are earning well or are financially stable, you wouldn’t think twice before applying for a mortgage loan for your dream house. But have you ever wondered how will you repay the loan if you lose your job or cannot work for some reason? Don’t worry, this is where mortgage protection insurance comes into picture.
A mortgage protection insurance covers your mortgage payments in case of hardships. Also known as mortgage protection payment insurance (MPPI), it is similar to life insurance where your mortgage gets repaid in case of your job loss, disability or even death. In case of job loss or disability, the insurance company makes the monthly mortgage repayments while in case of extreme situations like death, it repays the mortgage balance amount to the mortgage company. Thus, even after the person’s death, his family members have the roof on their head intact. Though mortgage protection insurance is not mandatory with a mortgage loan, it is important for people who have already stretched their financial situation with the mortgage. The financial condition of such people is delicate and it cannot bear unforeseen shocks like job loss and unemployment.
There are different type of mortgage insurance policies available but basically they are of following types –
- Level Benefit Term Policy – In this type of policy, a person pays a specific amount to lock-in premium and set a specific time period, around 20 to 30 years). It is similar to a term life insurance policy , the only difference is in this case the benefits go towards the person’s mortgage.
- Return of Premium Term Policy – This is an attractive policy where your premiums, paid for mortgage protection, are paid back to you if you are alive till your mortgage gets paid off completely. Thus, not only your debt is paid off, you also get some nice amount to cash.
Mortgage protection insurance is beneficial to people who are in high risk occupations and cannot get a disability insurance as well as people who have health issues. It offers a person flexibility and relieves him from tension of safeguarding the house for his family in case something happens to him. Even if he loses his job, he will be at peace about making interest and mortgage repayments and concentrate his attention on finding another job.
Mortgage protection insurance is not meant for people who outright own a house, in fact, it is a waste of money for them. Also, clearing off the debt with a mortgage insurance policy, in case the person dies, may not be an ideal option in all cases. How useful mortgage protection insurance can be for a family, depends on its financial planning.
Mortgage protection insurance is a smart option and anyone going for a mortgage loan should consider it too.