Mortgage protection insurance protects borrowers by covering mortgage payments in the event of unforeseen events, such as unemployment, injury, illness, or death. On the other hand, lender mortgage insurance, also known as LMI, is insurance that protects the lender and not you. Mortgage life insurance, also known as mortgage protection insurance, is a life insurance policy that pays your mortgage debt in the event of your death. While this policy can keep your family from losing their home, it's not always the best life insurance option.
As with other types of life insurance, mortgage life insurance may not be available after a certain age. Mortgage protection insurance is a type of life insurance that will help you with your outstanding mortgage (or part of it) if you die or are unable to pay the mortgage due to disability, illness, or the loss of your job. Mortgage protection insurance covers a variety of causes that prevent you from paying your mortgage payments. Because mortgage life insurance policies don't consider health when setting prices, they generally cost more than a term life insurance policy for the amount of coverage you get.
Unlike other types of life insurance, mortgage life insurance is set up solely to pay what's left of the mortgage. Mortgage protection insurance is often confused with mortgage insurance (LMI) from lenders, which is completely different. That can also be the case if you take out other types of coverage and specify that you want the income to be spent paying the mortgage, but the benefits of mortgage life insurance go directly to the mortgage lender. In addition to this, mortgage protection insurance is often more expensive than an income protection policy and, at the same time, offers less comprehensive protection.
As with other types of life insurance, there are several factors you should consider before taking out mortgage protection insurance. Generally, LMI is added to your mortgage loan, while mortgage protection insurance is a separate expense. While there are some benefits to buying mortgage life insurance, this type of policy has key disadvantages. The death benefits of a mortgage life insurance policy go directly to the mortgage lender, so loved ones won't receive the money.
To determine if you need mortgage protection insurance, it's best to discuss your needs with a qualified insurance specialist. While these policies cost more and may offer lower coverage than fixed-term policies that review medical records and perform physical exams, they will at least pay the same benefit, regardless of whether you die 10 or 25 years after the mortgage.