Updated: Apr 11, 2019
At Vianca’s Insurance & Financial Services, we offer a full range of services in order to allow clients access to affordable life insurance that provides a safety net on your mortgage. It helps protect your family from any future events, that could leave your loved ones in debt.
What is Mortgage Protection Insurance
In the event of death of an insured, mortgage protection provides a financial safety net over your home. Similarly to a life insurance, mortgage protection provides coverage for your mortgage but contrary to life insurance, mortgage protection appoints the mortgage lender as primary beneficiary. As the name describes, a mortgage policy solely protects your mortgage debt with no benefit to the borrower. The type policy has a very high acceptance rate and offers the ability of monthly payments towards your mortgage for a set period in the even you lose your job. The insurance policy assures the mortgage payment protection over your loan in any given time during the original loan.
What Are Some Drawbacks?
First, one of the major drawback is Mortgage Protection's rapid depreciation of policy value. For example: Say you purchase a twenty year policy and the value or amount covered is $300,000. You start with $300,000 worth of coverage but as time passes it decreases every executive year based on the total payoff amount currently owed on your mortgage. This means even if you obtained a $300,000 policy but you only owe $50,000 on your mortgage, at the time of your death your Mortgage Protection policy will only pay $50,000 even though you are still paying for $300,000 worth of protection. The policy will pay your mortgage but you will pay the same premium for 20 years with nothing extra in return.
Secondly, in an event of you losing your job the policy will only pay a limited amount of your normal monthly income. The policies will not covered the full percentage of your monthly mortgage, leading to more complications on your mortgage. Likewise, we recommend on investing into an extra account in event of this situation ever occurring.
What About Private Mortgage Insurance (PMI)?
It is a common confusion to believed both a Private Mortgage Insurance (PMI) and a Mortgage Insurance (MI) are adjacent to each other. In short, both polices are contrary of each other. PMI protects the lender, while mortgage insurance protects the homeowner. Additionally, PMI protects the mortgage lender if the equity on the home is insufficient to cover the loan. It will not provide mortgage payments in an event of loosing your job. More importantly, it will not cover any additional debt in the event of your death. Private Mortgage Insurance, could be canceled after the house value reaches 80% loan to value ratio. In some events, even after reaching the value ratio you could still be subjected to pay a certain amount for set amount of years.
Do We Recommend Mortgage Insurance?
We advocated on protecting your mortgage. For this reason, we always propose our clients to obtain a mortgage protection that would be funded by life insurance. It will provide the same financial safety on the mortgage, while giving a higher return to the borrower. Life insurance is non-depreciated, and will hold its value for the term obtained. In the event of your death, the total value of the life insurance policy can be used to cover the outstanding balance of your mortgage and could still have a resting balance that could help your spouse supplement their retirement. Adjacent to a mortgage policy, the premium paid monthly could stay the same based on the term obtained and health of the individual. Life insurance generates a higher return on your investment while protecting your mortgage simultaneously. At Vianca's Insurance our extended array of insurance products offer our clients the ability to obtain affordable insurance. Text on our providers to obtain a free quote in minutes.