Mortgage Protection insurance, not to be confused with PMI (Private Mortgage Insurance) which protects the lender, is designed to protect for most people their largest investment, the family home. This is done in one of two ways, either paying off the mortgage balance entirely or by providing the funds to pay mortgage premiums for a limited time.
Deciding which method is best for you depends on a few factors. First, is to understand that both methods are funded through a life insurance policy. People can have and often do have several life insurance policies each with goal in mind.
The most common policy is from your employer. Most employers offer a life insurance that can be 2 to 4 times your annual income or a fixed amount. Our advice is to get as much as you can from your employer as this will the least expensive life insurance you can get.
The reason, however, employers offer life insurance is to protect your income should you pass away prematurely. It is also the reason you cannot keep that insurance when you leave the job either by choice or retirement. The very few exceptions where employers allow some portion of life insurance to be retained after retirement.
The next area people often cover is their final expense or burial policy. These are usually smaller benefit amounts designed specifically to cover our funeral expenses.
Another area to cover is what we’re talking about, Mortgage Protection. These are most often funded through a term life insurance policy. Term insurance by gets you the biggest bang for the buck which, in most cases, will pay off you mortgage balance due to premature death. Today’s term life insurance also can provide funds during a chronic and critical illness to pay mortgage premiums or medical bills.
For some qualifying for term insurance can be difficult. Either from a past illness or simply because the cost is too high. When this is the situation, protecting mortgage premiums is the best option. These policies provide funds to surviving family to pay the monthly premiums while they grieve and decide their next steps without worrying about money.
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