Sometimes, you must present hard questions to yourself and then choose how to protect yourself, your family, and your home. Consider what would happen if someone listed on the mortgage became disabled, came down with a serious illness or died? Do other family members have the finances to make monthly mortgage payment? Do you have a financial back-up plan? Don’t feel alone. Many people don’t have a plan or any kind of insurance that would assist in these situations. In the past, life insurance was the choice to help a family out in case a primary provider died.
Mortgage Payment Protection Insurance (MPPI) or Mortgage Protection Insurance (MPI) can be described as a life insurance equal to the amount of your mortgage. Neither of these should be confused with Private Mortgage Insurance (PMI). They are totally different things. PMI is charged to you each month along with your mortgage payment to protect your lender in case you default on the loan. It is charged to those who do not put down 20 percent down.
Do you need Mortgage Protection Insurance?
To truly answer that depends on many questions:
- What’s your age?
- How is your health?
- Are you a smoker?
- How much insurance do you need?
- Is your primary concern paying off the mortgage?
- What is your family’s income stream after your passing?
Where the Money Goes
If you choose mortgage protection insurance, the insurance company will send payment directly to your mortgage company, leaving your heirs with a home unencumbered by a mortgage.
Funds will also go directly to your mortgage company if your policy pays upon disability or job loss—usually for a time period specified in the policy, normally 12 – 24 months, and there is a possibility of a waiting period before these payments are made. Job-loss policies pay only the principal and interest on your mortgage, but there are riders that can cover other mortgage-related expenses, such as HOA fees.
A Policy for Peace of Mind
Mortgage protection life insurance protects your family if you die while your home’s mortgage is outstanding. It functions to meet the needs of families when a surviving beneficiary lacks sufficient income to cover the payments on the home and has no other residence. The policy pays the remaining balance of the mortgage when you die. With a mortgage life insurance policy, premiums are usually included in the monthly payment. There are many riders and options that can be added to the insurance, and that’s something to discuss with the loan agent. But its purpose is to help a family stay in their home and have the mortgage paid if there is a terminal or long-term illness, a layoff from a job, disability, or death.
Mortgage Life Insurance is considered a simplified issue product which simply means you don’t have to experience a series of medical screens and blood work to get approved. Not requiring medical to get underwritten makes it easier and faster to qualify. That’s good news to those who can’t get other life or disability insurance because of health issues or because of high risk jobs. If you have pre-existing conditions, you don’t need to worry.
Policy Declines in Value
Unlike other life insurance policies, mortgage protection life insurance declines in value as the insured person makes more payments to the policy. A mortgage protection life insurance policy is initially set up for the full balance of your mortgage. With each payment you make, the potential payout is slightly less, corresponding to your lowered principal balance. If you pay off your mortgage in your lifetime, the insurance policy expires and you have nothing to show for the payments.
No one knows when they will die, and we all die one day. But we cannot plan when heart attack, stroke or terminal illness will happen. You can arrange to have some type of financial protection for you and your family.
Golden State Mortgage Can Help
Golden State Mortgage is a California-based mortgage company specializing in new home purchases and mortgage refinance. Whether a FHA, VA, or USDA Loan, we have you covered with loan options for almost every lending need. With in-house underwriting, we can make fast decisions—and, we strive to close all loans in 28 days or less. Low Rates. Low Fees. Fast Closings—Call us today at 1-800-585-6886 or fill out the quick contact form to speak with a mortgage loan consultant to get a free good faith estimate.