Buying a home is a big expense that requires a big and long-term financial commitment. When you apply for a mortgage for the first time, you are approved for a loan based on how much money you have at that time. Most people don't expect that their finances will get worse over time, but sometimes that is exactly what happens. Whether it's because they lost their job or a family member died, it's unfortunate that many people find themselves in situations where they can't make their home loan payments.
What's the point of mortgage protection insurance?
If one or more people in a family died, it would be hard or even impossible for many of them to keep up with their mortgage payments. Before buying a home, it's important to think about how the payments would be made if a major source of household income suddenly stopped coming in, like if a family member died.
Even though no one wants to think that their family will ever have to deal with a worst-case scenario, it's important to have plans for everything. Since mortgages are such a big expense, it's important to think about how your family would avoid foreclosure and losing a loved one if something like that happened. By getting mortgage protection insurance, you can protect your family from having to deal with the possibility of a situation like this.
Simply put, mortgage protection insurance is a life insurance policy that pays off your mortgage if one or more people covered by the policy die. The main goal of this kind of insurance is to ease the financial burden on family members who are left behind after a death. When a homeowner buys this kind of insurance, they are making a big promise to their families. This kind of convergence can make sure that a family will never have to leave its home because of a loss of income after a family member dies.
Who needs insurance to cover their mortgage?
Many people think that the only life that needs to be covered in a single-income household or a family where one partner makes most of the money is the main breadwinner's. But it's likely that the death of a spouse who doesn't work or who only works part time can also make it hard for a family to keep paying their mortgage loan payments.
Many people make the mistake of only thinking about the loss of income after a death. They don't think about how their costs will go up if one or both of the adults in the house dies. For example, if the spouse who doesn't work stays home with young children, the family doesn't have to pay for full-time child care. But if that parent wasn't there, the parent who works would have to pay for child care, which is a big expense, in order to keep working.
Where to get insurance to cover your mortgage
There are a number of ways to make sure that your family has enough money to stay in its home after one or more members of the household die unexpectedly. At the time you close on your home loan, you can buy mortgage protection insurance from many banks and other lenders.
These kinds of policies are specific to a person's mortgage, and if a covered event happens, the money is used to pay off the rest of the loan. There's also a chance that the same company that covers your home could also cover your mortgage. Most of the time, you can pay for these types of insurance with the escrow payments you make for your homeowners insurance and property taxes. These payments are part of your monthly house payment.
Another way to get mortgage protection insurance, though, is to get term life insurance policies for the adults in the house. These kinds of policies give the family members who are left behind more power. As with a traditional mortgage protection insurance policy, the policy proceeds can be used to pay off the mortgage all at once, or the person can keep making monthly payments and invest or use the rest of the money in some other way.
No matter what kind of coverage you choose, the most important thing is to make sure that your family is safe even if the worst happens. When you think about what else could happen, the price of mortgage protection insurance seems very small. When you buy mortgage insurance, you are investing in your own and your family's peace of mind.
