Mortgage protection insurance comes in different types, including private mortgage insurance for lenders, and mortgage protection plans for homeowners in case of death, disability, or job loss. Homeowners should choose the right plan based on their needs and compare rates from multiple sources.
Mortgage protection insurance comes in a variety of formats. Each is designed to provide coverage in the event of a specific accident. Private mortgage insurance is designed to protect the lender if the borrower defaults on the loan. Mortgage protection plans, on the other hand, are purchased to provide protection to the homeowner in the event of death, disability, or sudden job loss.
Private mortgage insurance is required for borrowers who are unable to provide a down payment of at least 20% of the home’s selling price. Because the lender bears higher risk due to the buyer’s lower initial capital, private mortgage insurance pays the outstanding loan amount if and when default occurs. This type of mortgage protection insurance is usually included in the borrower’s monthly mortgage payment and is paid directly to the lender.
A separate mortgage protection plan is available to protect borrowers directly in case they are unable to make their monthly payments. Choosing which type or combination to purchase depends on the borrower’s anticipated needs. Homeowners who have multi-dependant households may want to consider mortgage life insurance.
In the event that a homeowner dies, mortgage life insurance protection will pay off the remaining loan balance. While this type of mortgage insurance may not make much sense for singles, a young breadwinner would benefit greatly from the plan. It would ensure that the family still has a place to live despite the sudden loss of life and income.
Disability mortgage insurance pays the monthly mortgage payment if the borrower suddenly becomes disabled and unable to work. This type of insurance is probably unnecessary for those who already have disability insurance through their employer. Any separate disability policy will cover a percentage of your salary, which will help you keep paying your mortgage. For those in high-risk, physically demanding jobs who don’t carry a separate disability policy, this type of mortgage protection insurance may be worth considering.
Another type of mortgage protection insurance is unemployment insurance. This covers your monthly mortgage payment if you suddenly lose your job. Those who don’t have substantial savings or the discretionary income to contribute regularly to a savings account may find this type of protection beneficial.
Choosing a mortgage protection insurance plan involves comparing rates from multiple sources. See exactly what each policy covers as some companies offer bundled packages. For example, one plan might include life and unemployment protection, while another provides only one of two available coverages.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
