What is mortgage insurance?
Mortgage insurance is a type of policy designed to protect your mortgage payments in specific situations where you might struggle to keep up with them.
There are two main types: Mortgage Payment Protection Insurance (MPPI) and Mortgage Life Insurance. MPPI covers your mortgage payments if you're unable to work due to an accident, illness or unemployment, while Mortgage Life Insurance ensures that your mortgage will be paid off if you pass away during the term of the policy.
What does mortgage insurance cover?
With MPPI, you’re covered in scenarios where accidents or illnesses prevent you from working, typically for up to 12 or 24 months. It also kicks in if you lose your job through no fault of your own, covering your mortgage payments during this challenging period.
On the other hand, Mortgage Life Insurance steps in if you pass away during the term of your mortgage, paying off the remaining balance and ensuring your family isn't left with the debt.
However, mortgage insurance isn’t a one-size-fits-all solution. There are exclusions to be aware of. Pre-existing conditions might not be covered, and if you voluntarily leave your job MPPI typically won’t help. Claims arising from fraudulent activities or negligence may also be denied, so understanding these exclusions is crucial to avoid unpleasant surprises.
Do you need mortgage insurance?
Deciding whether you need mortgage insurance depends on several factors. Employment stability plays a big role; if you have a stable job with good benefits, you might not need MPPI. However, if your job is less secure, it could be a valuable safety net.
Additionally, if you have substantial savings, they can act as a buffer in case you’re unable to work, potentially reducing the need for MPPI. For those with dependents, Mortgage Life Insurance can provide peace of mind that they won’t be burdened with any outstanding mortgage debt if you should pass away. Your health is another consideration; being in good health can get you better rates, but if you’re concerned about potential health issues, having insurance can be a good precaution.
Before taking the plunge, there are a few things to consider. Understand the policy terms, including what’s covered and what’s not and ensure the premiums are affordable and compare different providers to get the best deal.
Consider how long you need the coverage as some policies only offer protection for a limited time. It’s important to look into other types of insurance or financial products that might offer similar protection, such as income protection insurance or health & life insurance.
Mortgage insurance can be a valuable tool in safeguarding your home and financial stability. However, it’s not for everyone, so weigh up the costs, benefits and your own personal circumstances before you decide.
