Mortgage protection life insurance (mortgage protection insurance) can be confusing – after all, there are many companies selling a variety of products and coverage for homeowners.
Here are some of the most common questions our clients have had about mortgage protection insurance:
Who needs mortgage protection insurance?
It’s simple: If you have a mortgage and you have people who financially depend you, then you most likely need mortgage protection life insurance.
If you unexpectedly pass away, this insurance can help prevent your home from going into foreclosure and can protect your family from financial hardship. With mortgage protection insurance, your family will have the choice to pay off the entire home loan, pay off a portion of it, or even just keep making the regular payments.
Is mortgage protection insurance mandatory?
It is recommended but not mandatory. More than once, we have received a call from a family who had previously turned down the insurance. They didn’t think they needed it at that time. Then, the family member who was the primary breadwinner develops a serious illness or condition (like cancer), and the family calls to see if they can get the insurance after all. Usually, the answer is ‘no.’
The time to get insurance is when you are healthy. Don’t wait until you become uninsurable to apply.
I have no dependents. Do I still need mortgage protection insurance?
Even if you are single homeowner with no spouse, partner, or children living with you, with a mortgage protection insurance policy you’ll rest easy knowing that your home most likely won’t go into foreclosure just a few months after your death. If your mortgage is not paid for three months or more, your bank usually starts the foreclosure process.
Avoiding this scenario is especially important if your home is of sentimental value to you and your extended family. Is it a family heirloom? Has it been in the family for generations? Or maybe it is a special piece of property you invested in. Is it a farm that you would like your family to keep? There are many reasons to get mortgage protection insurance than just providing financial security for dependents and spouses.
I already have life insurance. Why would I need mortgage protection insurance as well?
If you already have life insurance, you might not need mortgage protection life insurance depending on the value of your current life insurance policy.
In this case, you should meet with a licensed insurance agent to reevaluate your coverage in order to make sure you have enough and to make sure your policy will do what you want it to. Insurance companies are frequently offering new insurance policy choices, so there may be a better option for you and your specific situation.
My employer provides me with life insurance. Isn’t this enough?
It depends. Usually employers do not provide their employees with larger policies, so you definitely want to check and see if the amount of life insurance you have will cover your home loan.
However, even if it is enough, all your work benefits, including life insurance, are usually only offered while you are currently working at your job. If you quit, get laid off, or leave your job for any other reason, chances are good you’ll lose the coverage you have through your employer.
When you purchase your own life insurance policy, you’re in control. As long as you maintain your monthly premium payments, it doesn’t matter if you change jobs. Your personal mortgage protection insurance will follow you everywhere.
My spouse is on our home loan, should we each have a mortgage protection insurance policy?
It is recommended. Mortgage protection insurance is tied directly to a particular person, not to a home loan, so if two or more people are listed on your mortgage or home loan, it’s important for each of you to have your own personal mortgage protection insurance policy. This provides financial protection for both of you.
Who gets the money?
You choose the beneficiary. You decide whether the money (the ‘death benefit’) goes directly to your spouse, partner, children, charity, estate or other. It’s completely up to you. And you can choose more than one beneficiary.
Is mortgage protection insurance (MPI) the same thing as private mortgage insurance (PMI)?
No. Some types of mortgage protection require the money to go directly to your lender to pay off your home. That type of insurance is called private mortgage insurance. Mortgage protection insurance (MPI) is not private mortgage insurance (PMI). Although they sound similar, mortgage protection insurance goes to your family; private mortgage insurance goes to your lender.
Is mortgage protection insurance the same thing as homeowners insurance?
No. They are completely different. Homeowners insurance protects you against financial loss in case your home is damaged, your property is stolen, accidents in your home and more and does not involve your death in any way. Mortgage protection insurance provides your family with the money they need to stay financially protected in case you die unexpectedly.
Is mortgage protection insurance the same thing as mortgage relief?
No. Mortgage relief is a program that helps you reduce your monthly home loan payments so you can stay in your home. Mortgage relief is usually sought after by people who can no longer afford their mortgage due to job loss.
Is my family forced to use the mortgage protection insurance payout to pay off our entire mortgage?**
No. In fact, your family will have full control over how to spend the money. Many people choose to use the money to pay off their home loan, to pay off a portion of the loan, or to continue making payments. But if your family needs money to pay credit card debt, medical bills, an auto loan or other, they can.
If my family never uses the mortgage protection insurance, will I get my money back?
That’s up to you when you first purchase your insurance. That option is called getting a ‘return of premium.’ There are many options and customizations when it comes to mortgage protection insurance, so if you are interested in a ‘return of premium’ rider, let your insurance agent know.
Is the money my family receives taxed?
No. The money your family receives (the ‘death benefit’) will not be taxed. They will receive the full amount, tax-free.
Do I need to update my mortgage protection insurance policy if I refinance my mortgage?
No. The insurance is not directly tied to your loan amount or lender. This means if you change mortgage lenders, you won’t have to make any changes to your mortgage protection insurance, and your monthly payments will stay the same.
If you do decide to take a loan out on your home, and you owe more on your home, you should contact your agent to see about increasing your mortgage protection insurance coverage to make sure your family is still fully protected.
Do I need to buy new mortgage protection insurance if I move to a new home?
No. Your mortgage protection insurance is portable. It will cover the mortgage of any home you purchase. Although, if your new mortgage is higher than the previous one, you should talk to a licensed insurance agent to see if you can increase your coverage for your new home loan. Your family will need the extra financial protection if your mortgage payments have increased.
What if I already have mortgage protection insurance but still want more?
Contact a licensed insurance agent to get a policy review. The agent will go over your current policy in detail, assess your needs and make sure you get the coverage you want. Even if you don’t plan on adding to your current policy, a policy review is always a good idea every few years.
Insurance companies frequently come out with new policy types and insurance products, and they often change their rules about who they will or won’t cover, so you might get a much better policy at the same price you are paying today.
Does mortgage protection insurance have a declining payout (decreasing term)?
Some types of mortgage protection insurance do have a declining payout. Asurea specializes in policies that have level, monthly payments and still have a full-payout in the case of your death. This is called a ‘level death benefit.’ Even if you completely pay off your mortgage, as long as you still have your mortgage protection insurance, your family will receive the full insurance amount if you die.
Will my premiums (monthly payments) ever change?
No, not unless you cancel your policy. Your premiums will stay the same throughout the entire time you have the policy.
If you stop making the payments on your current mortgage protection insurance policy, your policy will be cancelled. You can always get another policy, but it may be more expensive. Purchase your policy as early as you can and keep up with the payments to lock in your low rate.
Important advice: Never stop making payments on your current policy without checking with a licensed insurance agent first. Sometimes you may not qualify for new insurance due to health issues or the new monthly payments might be much more expensive. An insurance agent can go over all of your options.
Does my mortgage protection insurance expire?
It’s up to you. Usually people purchase mortgage protection insurance to cover their home loan. Once the loan is payed off, some people decide they don’t need the insurance anymore and cancel it at that time. When you purchase your insurance, you and your insurance agent will choose how long you want your insurance for. Do you need it for 20 years? 30 years? It’s up to you and your personal needs. At the end of the term you choose, the insurance will expire.
Also, you might have the option to add on more insurance, extend the time you have it once the planned term expires, or even convert the insurance into a permanent life insurance policy, so make sure you stay in touch with your insurance agent. It is a good idea to get a policy review every few years to make sure your insurance needs are being met.
Do I have to complete a medical exam to qualify for mortgage protection insurance?
Not usually. In fact, it’s easier to qualify for mortgage protection insurance than most other types of life insurance, making it a good choice for people who have had trouble buying insurance due to pre-existing illnesses.
I have had a hard time getting life insurance in the past. Will I qualify for mortgage protection insurance?
It depends on why you have had issues in the past. Mortgage protection insurance is one of the easier insurance policies to qualify for, so in many cases, you will be able to get coverage. If you have been denied insurance in the past due to your age or a pre-existing condition, you should still apply for mortgage protection insurance to see what coverage you qualify for.
Can I get unemployment, disability or critical illness benefits?
You can purchase additional coverage to protect yourself financially against unemployment, disability or illness. Some mortgage protection insurance policies come with the additional coverage built in, but others require you add them on as riders.
How much mortgage protection insurance can I buy?
Mortgage protection insurance is a type of life insurance, so how much coverage you get is really up to you. Most people get enough to cover their entire mortgage if the breadwinner passes away, but you can choose to apply for more if you want. In the end, it is the insurance company’s decision on how much you qualify for.
How much does mortgage protection insurance cost?
This definitely deserves an ‘it depends’ answer.
Mortgage protection insurance is usually purchased to allow a family to stay in their home and either pay off or keep making payments on the mortgage, so the amount purchased is often lower than typical life insurance. Since the policy purchased is smaller, the payments will be less. If you want insurance that covers more than your mortgage, then your payments will be higher.
In addition to the amount of insurance you decide to buy, your payment will depend on your age, your health, your occupation, your hobbies and more. This is where a licensed insurance agent comes in. They will meet with you personally and go over every aspect of your particular situation and present you with the policies you qualify for.
The younger you are, and the healthier you are, the lower your monthly payments will be. We have been able to find polices with certain insurance companies that have been as low as $17.25* a month.
* Based on a 10-year policy at the preferred plus, non-tobacco rate (depending on your individual needs and circumstances, this price may vary)
Can I get a mortgage protection insurance quote over the phone or through email?
Yes, however, we also like to meet with you in person if possible. Your insurance agent is going to need all of your personal information, such as your age, your health history and many other personal details, and this may not be something you will want to share over the phone.
There are many factors that go into deciding on the correct policy. We value and protect your personal information, and this means we often prefer to meet with you in person, to discuss all of your options and to make sure you have filled out the application 100% correctly and thoroughly. If the application is not completed correctly, your family might not get the financial protection you had planned for them because the insurance claim is denied.
Most likely, you will have several options available to you, and your agent can go over each of them in detail, showing you the different illustrations. This process can be more difficult over the phone. But if you live in an area where we do not have agents or you prefer to talk over the phone, we can definitely do that. We have excellent agents who will walk you through the process, step by step, right on the phone.
Many websites have a form I can fill out to get an instant quote. Why don’t you?
Because we believe in truthfulness, accuracy and options. When you fill out an online, instant quote form, you are getting a very rough estimate of what your policy might cost. Ask yourself, do you really know your ‘risk class‘? Your risk class will drastically change the price of your insurance.
We do have access to no-medical-exam, guaranteed-issue mortgage protection insurance like many of the online quotes promise, but we still need to discuss your personal information before we can give you an accurate quote.
Basically, we feel the instant-quote, online forms can sometimes be a type of bait and switch. You will be quoted one price online, but then when you speak to a licensed agent in person, you will get a completely different quote because the agent gets more detailed information about you – information the online form does not ask. We want to be honest up front and get you the coverage you need at the price you can afford. Not make false promises.
In addition, if you purchase online, and your family does end up needing the insurance, when they contact the insurance company after you pass away to make a claim, they may receive upsetting news. The insurance you bought might have exceptions and limitations that you did not know about. Or maybe the insurance application was not filled out correctly and your family can’t get the insurance money you had planned for them.
With a customized quote from a live person (in person or over the phone), you will also be able to look at all of your choices. You will learn about additional options, such as disability insurance or a waiver of premium rider, and be able to choose from a variety of plans from several companies. With so many choices available, you really do need to consult with a professional, licensed insurance agent and not go-it-alone with a one-size-fits-all form you found on the internet.
Why should I choose mortgage protection insurance from Asurea?
You may be surprised to hear that Asurea is not an insurance company; we are an insurance agency.
Our agents are independent and not tied to one particular insurance company. We are not locked into offering you just one insurance company’s policies. We have access to over 40 insurance companies, and we are able to learn about your unique needs, goals and budget to match you to the best fit.
We will find a policy that meets your needs and budget. Usually, we are able to present you with several choices that are the best match for what you are looking for. You and your insurance agent can discuss each one and choose exactly what you need.
Plus, if you have had issues with qualifying for insurance in the past due to your health or age, since we have such a wide range of access to different insurance companies and policy types, if there is coverage out there for you, we will find it.
Contact Us to Learn More
Asurea offers Life Insurance, Mortgage Protection Life Insurance, Medicare Supplement Insurance, Final Expense Insurance, Disability Insurance, Long-term Care Insurance, Retirement Planning products and more. For additional information, click on the ‘Learn more’ button below. Want to have articles just like this delivered to your inbox? Just enter your email address in the box below and click ‘Subscribe.’
Mortgage Protection Life Insurance death benefit may be used for any purpose. This information is provided for general consumer educational purposes and is not intended to provide legal, tax or investment advice. Dollar amounts are for illustrative purposes, not actual.
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