Mortgage Insurance – How To Get The Best Coverage!
Your home is likely the biggest asset you’ll ever own. So, what’s the best way to ensure its protected should something happen to you?
The housing market has been on the rise year over year for quite some time now. There are so many new development projects going up, it’s hard to imagine all the billions of dollars going into these mortgages. To protect these mortgages, homeowners have options: mortgage insurance provided by a financial institution, or mortgage protection using life insurance and critical illness insurance provided by an insurance company.
- Mortgage insurance works by paying off the outstanding principal balance of your mortgage should you die, have an accident or suffer a terminal illness, up to a specified maximum amount. Keep in mind that with each mortgage payment you make, the value of your mortgage reduces. However, the premiums you’re paying remain the same.
- Mortgage protection on the other hand, uses a combination of insurance policies to protect you:
- Term life insurance covers you for a set period — such as 10, 15, 20 or 30 years — and can be suitable for homeowners looking for low-cost insurance. While the premium may be low, the policy doesn’t incur cash value and only pays out upon death. However, the value of the policy doesn’t decrease so often there is more value for less money over traditional mortgage insurance.
- Permanent life insurance can be more expensive initially, but provides coverage for life. Premiums can either be guaranteed or variable, depending on the type of plan you choose.
- Critical illness insurance provides you with a lump-sum payment you can use for medical expenses or to pay off your mortgage should you be diagnosed with a serious illness that’s covered under the policy (and you meet the other policy conditions) — how you use the benefit is up to you.
Key differences between mortgage insurance and mortgage protection using term life insurance