We often get asked when is the best time to purchase mortgage protection insurance. As with many important questions in life, the answer is usually…it depends.
We work with clients every day, and we recommend that today is always the best time to purchase mortgage protection insurance.
Every family’s budget and finances are different. A family’s budget and finances will also be different 12 months from now than they are today.
One of our key goals is to balance risk, affordability, and budgetary concerns with our clients. We do this in several ways to create a favorable outcome for our clients to protect the home when a spouse or partner dies.
When is the best time to buy mortgage protection insurance?
Today is the most obvious answer.
The minute you sign the mortgage loan documents, you’re taking financial responsibility for paying your loan back to your lender. If you die and still have a mortgage, your spouse or partner will be financially responsible for making your mortgage payments or paying the mortgage off.
Dual income earning families are now the norm, not the exception. When a loved one dies, their ability to contribute income to the household dies with them. When this happens, there is a high chance the home will be lost to foreclosure or bankruptcy.
Many people feel mortgage protection insurance is part of the cost of owning a home. When they purchased their home and signed the mortgage documents, they have allocated part of their budget to protect the home with mortgage protection insurance.
When is the next best time to purchase mortgage protection insurance?
As soon as possible is what we recommend. Most families, when they purchase a house, are unsure of what their new monthly expenses will be. If they rented a home before, they knew they had to pay only rent, utilities, and insurance.
When you purchase a home, you will have to pay additional expenses did not exist when renting. You will have maintenance and upkeep expenses. You’ll have yard care expenses. You’ll have cleaning and other repair and maintenance costs. You will also have property assessment taxes you did not have as a renter.
Many people we work with approach us after about a year to purchase mortgage protection insurance. By then, they have settled into their homes and understand what expenses are occurring monthly. They are also confident about what’s available in their budget to protect their home with mortgage protection insurance.
Can I wait too long to purchase mortgage protection insurance?
If you know you will never die, if you know you will never get sick or injured, and if you know your ability to earn an income will never be interrupted, you don’t need mortgage protection insurance or life insurance.
In the last week, we have had three people call us with newly diagnosed health problems. A 59-year-old man had a triple bypass surgery one week before. A 37-year-old gentleman called us who suffered a TIA three weeks before. A 29-year-old woman called us who had been diagnosed with breast cancer four weeks ago. All three now wanted mortgage protection insurance…and fast!
Our heart goes out to these people as they struggle with the mental, physical, financial aftermath of being afflicted with serious medical problems. The fact is, however, they all called us too late for the best and most affordable outcome.
Can I purchase mortgage protection after a serious medical diagnosis?
Yes, usually you can still purchase mortgage protection. The problem, however, is it will be much more expensive after the diagnosis of a health problem.
Our 59-year-old gentleman with a triple bypass heart surgery would easily qualify for an affordable nonmedical mortgage protection policy before his diagnosis. He had an $89,000 mortgage that would have been easily affordable in his budget to protect mortgage protection insurance.
After his triple bypass heart surgery, he might only afford $10-$15,000 for the coverage or accidental death only insurance coverage.
After three years, our 59-year-old triple-bypass gentleman may qualify for more favorable coverage with insurance companies. However, he would be 62 years old, and his insurance coverage would be more expensive, since he is now three years older. He would still be limited to the amount of mortgage protection he could qualify for.
How much mortgage protection should I purchase?
Mortgage protection is designed to do two things: to protect the home from going into foreclosure and to protect a family from going into bankruptcy. With that in mind, you don’t have to cover your entire mortgage amount.
If you have a $150,000 mortgage and a $150,000 mortgage protection policy, when you die your home will be paid off for your spouse or partner…problem solved!
If you have $50,000 on a mortgage protection policy and die 12 years from now when your mortgage balance is $100,000, your spouse or partner would get a check for $50,000 from the life insurance company.
Your spouse or partner can then apply the $50,000 mortgage protection policy towards the $100,000 remaining balance on your mortgage and then refinance your mortgage for a lower monthly mortgage payment.
By doing so, the mortgage payment would be cut considerably, and the surviving spouse or partner would be able to pay the lower monthly mortgage payment and keep the house you two had worked so hard to own together.
Let’s also imagine that 12 years from the purchase date of your home, your home is now worth $225,000 with a mortgage balance of $50,000.
Your original mortgage balance was $100,000, and your spouse or partner paid it down $50,000 with the death benefit from mortgage protection insurance. They now have a $50,000 mortgage.
Your spouse or partner now owns a $225,000 home, with the $50,000 mortgage, and $175,000 worth of equity in the home.
If both spouses or partners had purchased a $50,000 mortgage protection policy, the $225,000 home, with $175,000 worth of equity, and a $50,000 mortgage would still be protected should the surviving spouse passed away unexpectedly.
This would pass the entire $225,000 home asset down to children or other loved ones; the home would be entirely paid off.
That’s one reason we love helping people with mortgage protection. People who care enough and love their families enough to protect their homes when they are no longer here are the people we enjoy working with.
When is the best time to purchase mortgage protection insurance?
Before you need it. As the stories of the three people who called us this week with recent medical problems illustrate, we don’t know what will happen to our families and us today, tomorrow, or anytime in the future.
Mortgage protection insurance is one way to protect the most significant asset that most families will ever own. And if you want your family to own your home asset, mortgage protection is a critical step in the right direction.
We do things differently
We believe if we treat you fairly, are honest, and get you the best pricing available, you will come back to us in following years. We also believe you will refer us to your family and friends.
We also don’t pressure our clients into purchasing products they don’t need or sell them overpriced mortgage protection policies. We make sure our customers understand what their plan costs and why we recommended it to them.
We are happy to be a 100% independent insurance agency, and not an IMO or MLM insurance agency. This gives us greater freedom to serve our clients better, and get them the best pricing for the mortgage protection insurance they so desperately need.
There are many reasons it is important to protect your home… the most important is your family. The second most important is to protect your financial investment.
Nobody wants their spouse or partner to lose their home after a death or disability occurs. Mortgage protection allows your loved ones to keep your home after you are gone. Protecting your family with mortgage protection is a gift you hope your family will never need, but a gift that is there for them if the worst ever happens.
We’re here to help you understand your options and help you find affordable insurance protection that will protect your home and family and fit your budget.