For many people, their home is a symbol of protection and comfort. It is also a major monetary investment, usually the largest they will ever make. The Federal Housing Finance Board puts the nationwide average cost of a house well over $260,000. Because of the heavy financial burden, families are very careful to make sure they take care of their house and do not lose it to financial troubles. A common way to avoid foreclosure in case of emergency is called mortgage protection insurance.
Because many families cannot purchase a house outright, they end up spending anywhere from 10 to 30 years making payments on a mortgage. Since the mortgage lasts for an extended period of time, families have to consider unplanned and unforeseeable situations to make sure they don’t end up in trouble. Possible scenarios may include:
· Death of income provider
· Income provider gets laid off
· Income provider experiences crippling accident
· Income provider becomes seriously ill
If the family is unprepared to deal with these types of situations they could very quickly fall victim to foreclosure and repossession of the house and become homeless. Fortunately, there is a financial concept widely practiced by many homeowners nationwide that ensures that the family still has a place to live and a way to continue to pay the mortgage in case their stream of income is suddenly cut short. Solid home mortgage insurance guarantees that the family can continue to make payments and remain in their home even if they have no income.
Also known as mortgage life insurance, a mortgage insurance plan is basically life insurance that helps the beneficiaries, or recipients, instead of the creditors. If the insured person happens to die or suffers some type of accident that invokes the insurance policy, the policy will pay for the rest of the balance of the mortgage. Some mortgage protection insurance companies require the family of the insured to pay a premium for the remaining duration. The costs of mortgage protection plans are proportional to the size of the mortgage for the particular house.
Conventional insurance policies cover mortgage payment if the insured dies. Another option is joint coverage for the insured and his or her spouse. With joint insurance, the policy pays for the mortgage if either dies. Mortgage protection plans also offer protection against serious illness, disability or accidents. Borrowers may of course fine tune their policy to get the coverage needed for their specific situation.
Because prospective borrowers do not need to be physically examined, mortgage disability insurance is a viable alternative for homeowners who would be denied other types of life insurance because of poor health and related complications. This type of insurance offers more options and larger benefits than regular term-life insurance policies. Many policies include a “Waiver of Premium” that permits the homeowner to stop making payments in the event of a disability. The idea is to allow the insured to physically recover and return to the workplace without constantly worrying about losing his or her home.
Homeowners who believe they are working in an unstable market or environment can sign up for mortgage unemployment insurance. These policies usually pay the homeowner’s premiums for up to 6 months after unemployment begins. The cost of this type of insurance varies according to the monthly benefit the insured wishes to receive when the policy is activated. A nice benefit of mortgage unemployment policies is that criteria that would normally raise the price of an insurance policy do not affect mortgage unemployment policies.
Homeowners should know that mortgage protection insurance is not the same thing as private mortgage insurance. If a homebuyer cannot afford a 20 percent down payment, lenders require that PMI be obtained to qualify for a mortgage. PMI protects the creditors instead of the buyers. In addition, PMI does not pay off the mortgage in times of emergency. It simply ensures that the creditors do not lose money on the mortgage if the homeowner cannot pay it off for some reason.
Homeowners looking for an insurance plan to help them protect their investment and offer security to their loved ones should look into mortgage protection insurance. Mortgage protection insurance gives homeowners the safety of knowing that if something happened to them and they were unable to continue making mortgage payments, their home would not be foreclosed, and if they died, their family would still have a place to call home.