Mortgage Protection Insurance, a Simple Safeguard to Prevent Foreclosure

Buying a home is a proud investment for most Americans.  Not only is owning a home part of the American dream, it is also a place to live, and start a family; it is also the most significant financial investment most Americans will ever make.  The National Association of Realtors states that the average home now costs over $200,000.  Many Americans do not have the cash to purchase a home, they rely on mortgages to finance their most prized possession.  With an asset of such importance, it is essential that it be well protected.  Most homeowners are aware of the need to protect their home from natural disasters such as hurricanes, floods, and fires with standard homeowner's insurance, but they all may not be protecting their homes from an even bigger threat: foreclosure. 

Accidents and unforeseeable circumstances can happen to anyone, at any time.  Tragedies such as disability, death, loss of a job, incapacitating accidents, or serious illness can leave any family without a way to meet the mortgage payments.   Without a plan, the threat of foreclosure and losing the home become an awakening reality.  However, with a backup plan, these threats can be avoided.   Mortgage protection insurance is a special type of insurance formulated exactly for protection from increasing your mortgage rates in this situation.  Mortgage protection insurance will eliminate the threat of foreclosure altogether, should anything happen rendering the family unable to make the mortgage payments. 

Also known as mortgage life insurance or decreasing term insurance, this protection plan ensures that the lender or his or her beneficiaries will never face the threat of losing their home due to inability to make the mortgage payments.  Should the mortgage holder become disabled, injured, ill, or unemployed and unable to earn an income, mortgage protection insurance will make the payments for them.  In the unfortunate event that the mortgage holder passes away, mortgage protection insurance will terminate the mortgage, and pay it off in full. 

Mortgage protection insurance should not be confused with private mortgage insurance (PMI).  Private mortgage insurance is required for borrowers who want to apply for a mortgage, but do not have the cash for a down payment.  PMI is only insurance for the lender, in the event that the borrower defaults on the loan.  Where mortgage protection insurance will pay off the principal in the event of death, or make payments if the insured cannot, PMI will not.

Purchasing mortgage protection insurance is as simple as making monthly payments.  The amount of the monthly premiums and the amount of coverage depends to the remaining principal of the mortgage that is being insured.  As the mortgage holder continues to make successful mortgage payments and decreases the mortgage principal, the amount of coverage from the insurance protection policy also decreases.  In the event of the borrower's death, the mortgage protection insurance will issue a death benefit, which will retire the mortgage, and pay the remaining principal in full. 

A mortgage protection insurance policy may be tailored to cover a variety of unfortunate circumstances.  For example, a policy is offered that will pay a death benefit on either spouse, whichever dies first.  A mortgage protection insurance policy may also be purchased to cover any combination or all of the following: unemployment, disability, illness, or injury. 

Mortgage protection insurance offers several benefits over standard life insurance or term-life insurance.  First, no health examination is required, so a person in any health condition may purchase mortgage protection insurance, whereas they may not qualify for life insurance.   Mortgage protection insurance also offers a "waiver of premium", which is a provision that states that the insured person does not have to make insurance premium payments while they are disabled and unable to work.   This can prove invaluable, as a person is recovering from an accident or serious illness can focus on the recovery without having the pressure of making insurance payments or the threat of foreclosure over their head.  Protection from unemployment can also be purchased through a mortgage protection insurance plan.  Typical unemployment policies generally offer to make mortgage payments for up to six months while a person is out of work.  This can also help greatly by allowing the insured time to find new employment and get back on his or her feet without the stress and worry of possible foreclosure. 

Many homeowners with a mortgage and a steady income may not feel that they may be at risk for foreclosure.  Life is not always predictable, and unfortunately, unfavorable events may occur at anytime that interrupt income, and leave the borrower at dangerous risk of losing their home.  This danger can be avoided with the peace of mind of mortgage protection insurance, a simple safeguard all mortgage holders should have for themselves and their families. 

For additional information on mortgages and loans, check out Personal Home Loan Mortgages.