If you have dependents or loved ones that depend on your income to cover bills and expenses, such as mortgage payments, auto payments, insurance payments etc., it is smart to prepare, so they can cope financially in your absence.
Death is a possibility for any of us on any day, at any time, and in any place. Life offers no guarantees; today is a blessing, and tomorrow is a gift.
None of us knows our future. We don’t even know what is going to happen one second from now! With this uncertainty, it makes sense to plan for life’s surprises.
Life insurance will help you take care of your family when you are gone. Insurance companies allow you to pay a small monthly premium that will pay out a large lump sum to your family when you die. This money goes to whoever you direct it to go to; it would typically be a spouse, partner, or family members.
Having a life insurance policy in place offers peace of mind that your loved ones will have the financial resources to pay expenses in your absence.
Life insurance can be used for many purposes. Mostly, life insurance plans are used to replace income in your absence or to pay off large financial obligations, such as a business loans.
What is life insurance?
Life insurance is a financial product designed to pay out a lump sum should you die unexpectedly. Life insurance can be structured in many ways. Some policies allow beneficiaries to receive a lump sum payment or even monthly payments.
One of the most common life insurance products available is called “term” life insurance. Term life insurance policies should cover a specific period, typically 10, 15, 20, 25, or 30 years.
The insurance company will consider your age, health, family health history, and financial needs when determining how much life insurance to approve. Most term life insurance policies have a monthly premium that will not change throughout the term of the policy and a fixed lump sum payout if you die during the term period.
Another option available is called “whole life” insurance. A whole life insurance policy will cover you and protect your family for your entire life, rather than a fixed term. Because of the guaranteed payout option, if the policy stays in force, whole life plans are more expensive than term life plans.
The first step in purchasing life insurance is deciding how much insurance coverage you need. This amount will be different for every person, every family, and every financial situation. Some families will need $100,000 in life insurance, and some families will need millions of dollars in life insurance.
Mortgage life insurance – The old kind
Mortgage life insurance is life insurance designed to pay off, paydown, or protect any outstanding mortgage debt.
Many prior homeowners will remember a type of mortgage protection insurance, where the payout amount decreased over time at the same rate their home mortgage loan was decreased. This mortgage protection was called “decreasing term insurance.”
This insurance product was very convenient for consumers, as it was offered at the same time you signed papers for your home mortgage. It was a one-stop shopping experience that allowed you to bundle the mortgage protection into your home mortgage payment.
The disadvantage of this type of insurance is your premium remained the same throughout the term of the loan, while the payout amount decreased. This meant you would pay the same amount of money at the beginning of your loan, when you owed hundreds of thousands of dollars, that you did at the end of your loan, when you owed hundreds of dollars.
These types of mortgage protection life insurance policies were not suitable for interest-only mortgages. This is because, with an interest-only mortgage loan, only interest is paid in the early periods of these loans and because the total capital does not reduce.
Also, if you sold or refinanced your home, the mortgage protection life insurance is attached to your loan and would terminate when your loan terminated (sold home, refinanced, bought new house, etc.). If your health changed since your last mortgage (as it often will), you might become ineligible for decreasing term mortgage protection.
This decreasing term insurance disappeared for most lenders when the housing market crashed in 2008 and 2009. Banks decided to stick with what they were good at (banking) and let insurance companies, who specialize in protection, help homeowners insure and protect their homes.
Mortgage protection policy – The new kind
The new mortgage protection life insurance policies correct many problems that occurred with older decreasing term life insurance policies.
We protect mortgages and homes today with life insurance policies that have a level premium and a level payout amount. These new policies have living benefits that protect you in life and death. These new policies are now portable, meaning that, if you sell your home, you can take the protection to your next home.
The new mortgage protection policies include living benefits. Some of the many benefits available are:
Terminal illness benefits
- Medical bills associated with diseases and terminal illness are the biggest reasons people lose their homes. Terminal illness benefits in mortgage protection policies allow you to receive your death benefit from 12 months to 24 months before your death.
- These benefits are critical in keeping families in their homes, allowing them to pay medical bills, mortgage payments, and food bills while a family member is struggling with a terminal illness.
- Becoming disabled and not working and providing income for your family is another way people lose their homes. Most injuries are short-term injuries, where the victim will recover and be back to work within twenty-four months.
- Banks and home lenders, however, won’t let you stop making your mortgage payments just because you’re injured! Disability insurance within a mortgage protection policy allows your mortgage payment to be made for you while you are injured and recovering. This will keep your home safe, your family protected, and your mortgage lender paid until you can get back to work.
Critical illness benefits
- Heart attacks, strokes, and cancer are occurring every day. These are serious, life-threatening illnesses with serious life-ending results. Some mortgage protection policies allow you to include lump sum payout coverage for these and other critical illnesses.
- These payouts should help you pay the budget busting medical bills, treatment plans, and recuperation cost from these illnesses. Most families simply cannot absorb $50,000-$100,000 in medical bills because of a critical Illness.
Return of premium benefits
- There are return of premium mortgage life insurance products available. These allow you to make premium payments, and at the end of the mortgage protection policy, you would get all or part of your monthly premiums back.
How do people shop for mortgage protection?
Some people don’t shop for mortgage protection insurance. They rely on luck and hope they will not die expectedly, be diagnosed with a terminal illness, be in an accident, or have any health issues.
They are comfortable rolling the dice and accepting the risk that, if they die, their family must sell their home and find other living arrangements. Maybe it’s moving back in with parents, maybe it’s cramming into a small apartment, maybe it’s public housing, maybe even worse.
Many life insurance companies sell mortgage protection insurance by mailing out mortgage protection offer letters when you purchase or refinance a home. New homeowners are inundated with these after moving into their new home or after refinancing.
After sending in a letter, an insurance agent will want to visit your home and sell you mortgage protection insurance. Some agents only represent one company; other agents represent many companies. If you want a face-to-face shopping experience with an insurance agent, this may be a good choice. Your agent’s experience level may be low as the insurance industry has a high employment turnover rate.
Shop through a traditional life insurance agent or agency
Many life insurance agencies are called “captive” agencies and only sell their brand of life insurance. If your insurance company sells home and auto insurance AND life insurance, you will be sold straight life insurance, not mortgage protection insurance.
You will not be dealing with an agent, who specializes in mortgage protection, who understands how to work with you to protect your home.
Shop online through a company that specializes in mortgage protection
All we do at buymortgageprotection.com is help people understand if mortgage protection will benefit them and help them find affordable mortgage protection insurance.
There are many life insurance agency websites with one website page dedicated to mortgage protection. These are life insurance companies that sell life insurance and do not specialize in mortgage protection coverage. We are specialists in mortgage protection!
When you visit these life insurance company websites, look at their entire website and see what types of life insurance they are selling. It will quickly become evident they are selling life insurance policies and are not 100% dedicated to mortgage protection.
We are the only online insurance agency dedicated to helping homeowners protect their homes. Other insurance companies or agencies don’t have the vast knowledge and understanding we do for protecting your home!
We specialize in protecting your home, making it easy, and getting you the best pricing available.
We are experts in providing both non-medical exam mortgage protection and other, more involved, forms of mortgage life insurance.
Call us today or fill out our free quote form to get your home protected today!