You never know when a sudden financial crisis may make it difficult for you to make your monthly mortgage payments. However, by purchasing a mortgage protection insurance policy, you can ensure that your home loan payments are made on time.

Why to purchase mortgage protection insurance

The lenders have every right to foreclose a property when a borrower is unable to make the mortgage payments on time. By purchasing a mortgage protection insurance policy, you can reduce the chances of losing your home. What happens is you purchase the policy and pay the premiums on time. In return, the insurer promises to make the monthly mortgage payments if you suffer an injury and/or become disabled or pay the entire mortgage balance in the event of death of the policyholder.

Where from to purchase mortgage insurance

You can purchase a mortgage insurance policy either from an insurance company or through a mortgage lender. Regardless of where from you purchase a policy, it is advisable that you consult with an insurance agent and buy the required coverage at the time you take out a mortgage loan.

Types of mortgage protection insurance

The insurance companies usually offer 3 types of mortgage protection insurance policies that are given below.

1. Mortgage Life Insurance – It is somewhat similar to any other life insurance policies. This policy pays the mortgage balance in full when a policyholder dies before repaying the home loan.

2. Mortgage Disability Insurance – As the name suggests, this policy covers the monthly mortgage payments when the policyholder is unable to work due to an injury or disability.

3. Mortgage Unemployment Insurance – This policy covers the monthly mortgage payments when someone is laid off from his/her job. The insurers usually covers the home loan payments for a certain time period of till the policyholder gets a new job.

Cost of mortgage protection insurance policy

How much you need to pay for your mortgage protection insurance usually depends on 2 factors that are given below.

1. How likely you’ll become unemployed – Before offering you such a policy, the insurers calculate your chances of becoming unemployed. You’ll have to pay a relatively high premium if your chances of becoming unemployed is high.

2. How much you pay towards your home loan – The insurers also consider your monthly mortgage payments while deciding how much premium you’ll have to pay for the policy. You’ll have to pay less if your monthly home payments are comparatively low.

There’s an alternative to purchasing a mortgage protection insurance policy. Insurance companies usually offer mortgage unemployment and disability coverage as riders to mortgage life insurance. Moreover, you don’t require purchasing mortgage life insurance if you already have a life insurance policy. The latter is more flexible as the beneficiary/beneficiaries can utilize the money as they want instead of paying only the outstanding mortgage balance.