Taking out a mortgage on your home is a big investment that could go south if things do not work out the way you plan. A person could end up losing their job or be unable to work due to an illness, but they will still need to make repayments as they could lose their home. One could even die, leaving the mortgage to their family to pay off.
All of these can be avoided as there is one way to protect yourself and your home. Mortgage protection insurance will pay off some or all of a person’s mortgage loan if they are no longer receiving a secure income or in the case of their death.
Mortgage protection insurance is not a cheap financial investment. Different factors affect the cost of a person’s mortgage protection insurance, which will be outlined in this article; keep reading to know more.
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What is Mortgage Protection Insurance
Mortgage protection insurance is a type of life insurance that guarantees that if a person dies, a part or all of their mortgage loan will be paid off. Some policies will also cover the cost of your mortgage payments for a limited time if you cannot work (long-term illness or severe injury) or lose your job. Mortgage lenders and banks offer them.
How Does Mortgage Protection Insurance Work?
Usually, mortgage protection insurance is taken out for the same period of your mortgage term. When a person dies, the mortgage protection insurance will pay off what is left of their mortgage loan. The older a person is, the more likely they are to get a shorter term because the insurance will be able to make a pay-out.
It is important to note that the mortgage protection insurance beneficiary is not your family but your lender – your mortgage company. So, your family members should not expect an amount of money to sort out problems as the money will go directly to your lender. A mortgage protection insurance cannot be depended on or used to fund other things.
Why the Cost of Your Mortgage Protection Insurance Has Not Gone Down
As stated above, mortgage protection insurance is not a cheap financial investment, and different factors affect the cost. Insurance companies will always examine three major things; the cost of your mortgage loan or the remaining balance, how much of the loan you want to cover, and how much time you have left in your loan term.
Your mortgage protection insurance could cover a portion of your mortgage loan, your total mortgage loan, or your family’s mortgage loan for a certain period. It is up to you to choose which policy suits you best; the wider the policy, the higher the premiums.
Like a life insurance policy, insurance companies will also consider certain factors. These factors will affect the cost of your mortgage protection insurance, including your source of income, the overall risk level, and age. The older a person is, the more likely the insurance will make a pay-out.
Sickness, accidents, and unemployment mortgage protection insurance is more expensive than accident and sickness and unemployment only policies. Also, the cost of your mortgage protection insurance depends on the price you decide to add. For example, a disability rider will cover your bills if you ever end up with a long-term illness or bad health condition to end your career.
These are some of the factors that will be considered, and they will affect the cost of your mortgage protection insurance, hence, the reason why it may not be as low as you expect.
Conclusion
The best way a person can ensure mortgage protection is through mortgage protection insurance; it is a favorable policy with some disadvantages. Remember that the cost of your mortgage protection insurance will always depend on certain factors.
