So, you have just bought your first home and now the applications start arriving in the mail for something called mortgage protection insurance. You look over the applications, all of which are claiming how critical it is for you to protect yourself and your loved ones with their mortgage protection policy. You are thinking is this something I really need? After all, you are already paying for home owners insurance, car insurance, health insurance along with possibly dental insurance and life insurance. How much more insurance could you possibly need? Here is a look at what home mortgage insurance is and why in most cases it is a rip-off.
What is mortgage protection insurance?
Mortgage protection insurance is a policy you typically buy from your mortgage holder or some other type of banking institution. The coverage you are purchasing is a death benefit, similar to life insurance, but when you die the issuing bank will pay off the remainder of your mortgage. Mortgage protection insurance may also, depending on the policy, make your mortgage payments for a certain period of time if you lose your job or become disabled. Typically this is only for a period of about twelve months.
So is the insurance worth it?
In most situations, mortgage protection insurance is a way for the bank to make some free money. First, your policy, especially if you just bought your home and are holding a hefty mortgage will be costly. Once you purchase the insurance you will have a set premium for the life of your mortgage. The policy however is what you call a decreasing term policy. Meaning, that as the years go by and you pay down your mortgage your benefit decreases. When you die, the policy will pay out only what you have left on your mortgage, not the full value that it started at.
When the insurance policy pays out it is important to note that the check is sent directly to the mortgage company, leaving your beneficiary with no options.
Consider Term Life Insurance
If you are looking to purchase a policy to protect you and your home, it almost always a better option to purchase term life insurance. life insurance will be cheaper and you can customize your policy and take out a certain amount that will not decrease over time. If you want to make sure your mortgage is paid off, just be sure to factor that amount into how much insurance coverage you purchase. Sites like Accuquote will get you a free quote fast and easy.
Is mortgage protection service right for some people?
Under rare circumstances it might not be a bad investment. If you are young and healthy, you should run in the other direction. If however, you are someone who has health conditions that prevent you from purchasing term life insurance or makes your premium really high, then it might not be such a bad buy. While mortgage protection service premiums will not be cheap and they do decrease over time, for this small group of individuals it is some security. Unlike applications for term life insurance, you do not have to go through health screening tests to obtain mortgage protection insurance.
Get a Free Quote On Term Life Insurance
Accuquote offers a wide variety of insurance policies with very competitive rates. They also offer a free life insurance calculator as well as a free quote screener that will compare their prices with all of their leading competitors.