Private Mortgage Insurance vs Mortgage Protection Life Insurance – they might sound like the same thing…but they are not. Understanding the difference between Private Mortgage Insurance and Mortgage Protection Life Insurance could determine whether your family keeps or loses their home if you unexpectedly die.
What is Mortgage Protection Life Insurance?
If you die, your Mortgage Protection Life Insurance (Mortgage Protection) would pay all or part of your monthly mortgage payment. Your family could also choose to pay off a portion of the mortgage or even the entire mortgage. Whatever they decide, the bottom line is they get to keep the house.
You might consider buying Mortgage Protection when you purchase a new home or refinance your current home. As a homeowner and as someone who has people depending on you, you should have Mortgage Protection Insurance to make sure your family is financially safe.
Details About Mortgage Protection Insurance
- Your family collects the cash benefits (the money your family receives when you die) directly and immediately.
- The cash benefits you receive are tax-free.
- Your Mortgage Protection policy is portable. If you move, your new home is automatically covered under your existing policy. Although you may want to get a policy review to make sure your current policy still covers your needs.
- If you didn’t die by the end of the policy, you will get a refund of all the monthly, premium payments you have made (depending on what type of Mortgage Protection Insurance you get).
- You have the option to add on extra coverage in case you lose your job or become disabled.
- Today’s policies are often issued on a ‘simplified issue’ basis. This is a big benefit if you have an existing health issue or your job is particularly risky. You might not need to take a medical exam.
What is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance (PMI) is insurance that protects the lender (the bank you send your monthly mortgage payments to). If your family defaults on the mortgage, which often happens after the main breadwinner dies, the insurance company sends the money to the bank. Your family receives nothing, and they may lose the home.
Details About Private Mortgage Insurance
- The cash benefits are paid directly to your lender, not your family.
- You move, you lose. Your policy stays with the house, and you lose any money you’ve paid into your policy if you move to a new home.
- If you never you use the Private Mortgage Insurance, there is no option to get a refund of your premium payments.
Know what you have
If the bank has required you to get Private Mortgage Insurance so they get paid if you (or your family) default on your home loan, you should still consider getting Mortgage Protection Insurance. Don’t be misled like so many others, thinking that Private Mortgage Insurance payment is going to do anything to protect your family.
Get your family covered.
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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