My Personal Finance Blog

In today’s fragile economy, mortgage protection insurance makes more sense than ever. Not to be confused with private mortgage insurance, often simply abbreviated to PMI, mortgage protection insurance is designed to pay off your mortgage, or make payments toward your mortgage for a specified period of time, if certain specific events make it impossible for you to make your mortgage payments. As with any kind of financial product, it is very important to assess your needs, and carefully examine the insurance policies available to you before you make a decision to buy mortgage protection insurance. Below are things you need to know about mortgage protection insurance before you buy.

What is mortgage protection insurance?

There are two kinds of mortgage protection insurance, commonly called mortgage protection life insurance and mortgage protection payment insurance. Mortgage protection life insurance is designed to pay off the remainder of your mortgage if you should die before the mortgage is completely paid off. Mortgage protection payment insurance is designed to pay your monthly mortgage for a period of time if you should become disabled or lose your job before your mortgage is paid off.

How is mortgage protection insurance different from private mortgage insurance?

Private mortgage insurance, or PMI, is designed to protect the bank if you should default on the mortgage. Most lenders require that the buyer purchase private mortgage insurance if they finance more than eighty percent of the home’s value through a mortgage. Unlike mortgage protection insurance, which is meant to benefit the homeowner, private mortgage insurance guarantees that the lender gets their money back even if a foreclosure auction does not recover the full value of the house.

Private mortgage insurance, on the other hand, is designed to prevent foreclosure by paying a benefit to the homeowner.

What is mortgage protection life insurance?

Mortgage protection life insurance is term life insurance in the amount of the mortgage on a home. In many cases, policies that are labeled “mortgage protection life insurance” are priced higher than other term policies even though they do not provide any additional benefits. Since there is no standard for these policies, it is important that you read through each policy and understand exactly what benefits you are being offered. Certain policies, for instance, will reduce the amount of the benefit as your mortgage is paid off. Some policies may also reduce the premium, while others have level premiums that are calculated over the life of the policy.

What is mortgage payment protection insurance?

In most cases, mortgage payment protection insurance is an accidental death and disability policy which pays you or your beneficiary a specific amount each month, if you should be disabled or killed during the time that the policy is in force. Many mortgage payment protection policies will also pay benefits if you are laid off from your job during the time that the policy is in force.

Is mortgage protection insurance necessary?

Mortgage protection insurance is not extremely necessary, but it may be an excellent investment especially during this fragile economy. While no one wants to imagine their own death or disability, it makes sense to protect your family against losing their home in the event that you are killed or disabled. Protection similar to this is not always called “mortgage protection insurance.” In certain situations, it may be less expensive to take out a term life insurance policy for the length of your mortgage term. For example, if you have a 30 year mortgage for $150,000, it would make sense to take out a term life policy for $150,000, and keep it in force for 30 years. If you die before your mortgage is paid off, the insurance company will pay out $150,000 to your surviving spouse or children so that they can pay off the mortgage and not have to deal with the loss of their home.

How long will mortgage payment protection insurance pay my mortgage?

The number of payments that your mortgage payment insurance will cover is dependent on the policy that you choose. The most common policies will pay out for up to twelve months if you are unemployed due to illness or accident. A policy that also includes coverage if you are laid off will generally require that you establish that the job loss was not your fault before they make payments on the policy.

How much does it cost to have mortgage protection insurance?

The amount that you pay for mortgage protection insurance will depend on the amount of the benefit. In other words, if the policy pays $150,000 you will pay a higher premium than someone who has a policy that pays $100,000. Likewise, the premiums on a disability policy will vary according to the amount of the benefit paid out.

Like any other insurance, premiums and cost will vary widely based on many different factors. Be sure to shop around and compare prices and coverage to make sure that you get the best policy for your needs.

Allan Young is a freelance writer who writes about mortgages and home ownership, offering tips such as how to find the lowest mortgage rates .

Are you one of the millions of Americans who fear that company cutbacks may cause you to lose your job? With the national unemployment rate at the highest in 26 years, touching 8.1% in March of 2009, it is expected that millions of more Americans will lose their jobs this year before the economy gets better.

Though you may not be able to predict the stability of your job, what can you do now to protect your income and mortgage if a layoff occurs for you?

Contribute to Savings

Many individuals and families with good jobs and a mortgage do not have an emergency savings account set in place. What a tragedy that can be if a sudden loss of regular income occurs! To protect yourself and your family from a financial crisis, you should have a savings account set up with at least three, and ideally six, months of living expenses. That means you should look at your monthly budget and determine what basic costs you will incur, such as your house payment, groceries, car payment, etc.

If you have a little savings or no savings at all, start now. Open a savings account at your bank that you contribute money into each month. The more you can cut back now and put into savings, the better you will feel if you are suddenly laid off from work.

Buy Mortgage Insurance

Mortgage insurance is available that can help you pay your mortgage while you are unemployed. However, don’t confuse mortgage insurance with Private Mortgage Insurance (PMI). PMI is a type of insurance you may be required to pay for each month with your regular mortgage payment. PMI protects your lender and pays them the balance of your loan in the event you default. This is for the sole benefit of your lender and doesn’t help you prevent foreclosure.

Find an insurance agent that sells mortgage insurance. The type of policy you need is one that will take over all or a portion of your mortgage payment should you become disabled or find yourself unemployed due to layoffs. Premiums may be high, but the alternative could be a more expensive foreclosure if you are out of a job.

Find a Layoff Insurance Program

Many financial groups in many states offer “layoff insurance.” This type of income loss protection can help you pay your mortgage if you become financially unable to meet your mortgage obligation. However, you will usually be required to pay premiums for at least six to 12 months before you can file a claim. There may be other restrictions as well, such as a cap limit on the amount that the group will pay each month (i.e. meeting the principal and interest payment only and no tax escrow), and a limit on how long they will make your payment.

Groups that offer this benefit are not insurance companies, and thus, are not regulated by state insurance commissions in terms of financial reserves. Beware of groups who offer this type of benefit but are financially unable to pay claims.

This article is intended for general information. Always seek sound financial and legal advice before making any financial decision.

Helpful mortgage information at Online-Home-Mortgage.net P. Payne works for OHM Mortgage and Foreclosure Information Site providing answers to all those questions people need to know.

The unemployment rate is projected to rise in the coming year.  We have not yet seen the bottom of the hill we are sliding down.  With mass layoffs at large companies, and smaller layoffs with small local businesses, no one is certain of their employment. 

                  

There is something that you can do to personally prepare for the event that you will become unemployed in the future.  Just about everyone has some sort of insurance, whether it is life insurance, health insurance, mortgage protection insurance, critical illness insurance or auto insurance.  We all like to be protected from the unexpected or traumatic things in life.  Why is it that most people don’t have protection from unemployment?  Each State has an unemployment insurance most employees qualify for in the event of a period of unemployment, but the benefits are far from adequate to maintain your finances while you search for a new job.  The average unemployment check is only about $300 a week, and the average length of unemployment is about 16.5 weeks. 

Keep your family and your finances protected from unemployment with an unemployment protection plan.  Most plans pay a cash benefit to the member of between $1000 and $2000 per month of unemployment.  This is in addition to the state unemployment benefit that you qualify for.  Supplemental unemployment insurance can give you the cash that you need to pay whatever you see fit, from your mortgage to gas and groceries.  Look for a plan that pays you directly, and not something that just protects and pays your lenders as most plans do. 

For more information about Unemployment Insurance and protecting yourself financially from a job loss visit The Salary Guard at http://www.TheSalaryGuard.com.

Nathan Evans
The Salary Guard
Helping families prepare financially for a job loss and unemployment.
http://www.thesalaryguard.com