Why Buy Mortgage Protection Insurance? Getting a quote comparison for mortgage protection insurance policies is easy, just click this link and submit the completed mortgage insurance quote request. You will quickly receive the prices of the various policies available in your area. However, not all the policies are the same. In fact some companies sell basic term life insurance as “Mortgage Protection Insurance”. Sure it protects your family in case you die while you still have a mortgage. But, most foreclosures (62% in fact) are due to the unforeseen financial consequences of cancer, heart attack, stroke or other critical and chronic illness, not death. We detailed this in a previous article. Why buy mortgage protection insurance? Because the right policy can keep you from losing your home if you have cancer, heart attack, stroke or other ctirical and chronic illness that create the perfect storm of reduced income and higher expenses.
Why Buy Mortgage Protection Insurance?
A good mortgage protection policy is a term (no cash value) living benefit life insurance policy that provides you access to the death benefit immediately in the case of a critical illness like heart attack or cancer, and /or after ninety-days of chronic illness where you are unable to perform two or more of the activities of daily living. With access to the death benefit, you can receive tens of thousands if not hundreds of thousands of dollars, paid to you or your spouse to cover the bills and financial obligations of your choosing. Mortgage protection insurance is not about protecting the bank, it’s about protecting the quality of life of you and your family.
The policy should be provided at a low fixed cost, with the option to reduce the benefit, and therefore the cost, at any point in the future. In this way, as your mortgage is paid off, you have the option of reducing your coverage.
Because the primary objective is to cover your mortgage when you need, the mortgage protection insurance policy should also self-terminate at a fixed date. Often that date is 30-years in the future, but sooner is possible. You can also have the option of ending the coverage at any time by simply not paying the premium.
Portability. Few people stay in the same home all their adult lives. The right policy will belong to you and can move with you as you change homes over the years.
Most consumers assume that the mortgage protection insurance benefit should be large enough to pay-off the entire mortgage. While this is an option, it is not always necessary and may not fit into your current budget. You can also look at your monthly mortgage amount and target coverage for a certain amount of months. Knowing what mortgage protection insurance protects against, ask yourself “Why buy mortgage protection insurance?”. The answer to that question may lead you to knowing how much insurance is right for you.
It should be clear that living benefit mortgage protection insurance policies typically have a minimum amount coverage allowed of $50,000. Also, while the death benefit is $50,000, the living benefit may limit your access to 90% to 95% of the death benefit. The immediate cash payout could also be reduced by your life expectancy. This is the same math that reduces a $20 million lottery winnings to a lower amount if received as a lump sum. The lottery assumes the $20 million is paid out over 25-years and the mortgage protection insurance death benefit assumes the death benefit to be paid out at the end of your life expectancy. We don’t want to overcomplicate this and spend time discussing this in detail with each applicant. For the sake of illustration we make basic assumptions that are easy to follow.
Let’s assume we have a couple, both contributing to the family finances. Their mortgage is $300,000 over 30 years and for sake of easy math, they pay $2,000 per month to the bank in mortgage, taxes, escrow etcetera. If each have a $150,000 policy, they know that if the either were to pass away, the other would receive a tax-free lump sum check of $150,000 they could use as they wish, including reducing the mortgage balance on their home.
If, for example, one were to have contracted cancer and know they will be out of work for about 12 months. He or she could accelerate $50,000 of the policy death benefit to receive an immediate check. Because the insurance company priced the policy with a life expectancy of 90-years, that $50,000 expected to be paid out at age 90 would be reduced to approximately $25,000 (see the lottery example above). Now our insured cancer survivor still has $100,000 of insurance, and a check for $25,000 that will cover the mortgage for the year ahead.
The result; for the price of a basic term life insurance policy, our couple in the example have insured themselves against the financial consequences of critical or chronic illness. 62% of all home foreclosures are the result of the financial consequences of a medical event even with health insurance paying most of the medical bills.
They didn’t have to sell their home. They didn’t have to raid their children’s college education fund or their retirement savings. Their quality of life was never threatened because they made the decision to purchase living benefit mortgage protection insurance when they committed to a mortgage. They made the right decision and are better off for it.
When deciding how much mortgage protection insurance you need, first find out what the insurance will cost for each person involved. Typically, the price per thousand dollars of coverage is the same from a minimum of $50,000 up to at least $250,000. The cost per thousand dollars of insurance coverage can often decline above $250,000. Once you know the cost per thousand, then figure out what amount will fit in your budget. It makes no sense to commit more funds to insurance than you can afford. A canceled insurance policy is no good to anyone. However, remember that you can always reduce the amount coverage and lower the cost if it is a burden.
It may also be wise to go over scenarios in your head. Cancer and chronic illness can often take a toll on both husband and wife because even if only one is ill, the other will often reduce work hours to help care for their spouse. It’s emotional difficult to go consider the scenarios, but doing so can mean the difference of keeping or losing your home.
Why buy mortgage protection insurance? Because without it, you and your family can needlessly suffer the financial consequences of a medical event. Why buy mortgage protection insurance? Because it protects the quality of life of the people you love. That is why you need to buy mortgage protection insurance today!
Shield Insurance Solutions is an independent insurance broker. Our goal is to find the best insurance company, price and policy for you. We specialize in living benefit life insurance and Medicare Supplement insurance. We work with nearly 100 different insurance companies in order to find the right policy at the right price and value for you. We are transparent so you can make the most informed decision and have been in the financial services industry since 1984. Our life products include Medicare Supplement insurance / Medigap insurance, Whole Life, Universal Life and Term Insurance (all living benefit life insurance), mortgage protection insurance and final expense insurance. We are based in Jupiter and Palm Beach Florida, the treasure coast and licensed in almost every state including Virginia, Maryland, Oklahoma, Indiana, Pennsylvania, Alabama, Florida, California, Illinois and expanding. If you are shopping for a life insurance quote, we can show you what many of the top insurance companies will offer. The price differences will amaze you. Visit www.ShieldInsuranceSolutions.com to get a free life insurance quote comparison, or call us at (800) 847-9680