Payment Protection Insurance – What’s It All About?

Payment Protection Insurance – What’s It All About?

What is a Mortgage Payment Protection Insurance Mortgage Protection Insurance is exactly what it says it is.t is a life insurance that protects the mortgage.

Payment Protection Insurance - What's It All About?

If you die, the mortgage is paid off. It’s a decreasing term insurance policy on the life of the loan. The face value of the life insurance decreases as the remaining months of the loan decreases as well. For example, your loan amount on the house is $150,000 for 30 years so you purchased a mortgage protection insurance policy with a decreasing benefit with a face value of $150,000.

Lets say in 10 years your remaining balance on your loan is $125,000 the face value on your mortgage protection insurance has decreases to the same amount as well.$125,000. In most cases, the premium does not change, but it is usually more expensive than the regular term insurance and there is no cash value benefit.

It is not necessary to have insurance coverage with your loan, but a lot of lenders will make you believe that this is part of the loan package. Insurance companies pay good commissions to the insurance agents on Insurance policy sold.

A level term life insurance policy is a better policy and the rates are less if you have an excellent health. The benefits are paid to the beneficiary of your choice and the beneficiary decides what they want to do with the proceeds. They can payoff the mortgage or save the proceeds while paying the mortgage company each monthly as usual.

In other words, if you die your family, the beneficiary will be taken care off however if you have any medical issues such as over weight, high blood pressure and such, or a smoker, mortgage protection insurance could be purchased with no physical exams. You will not be rated like any other insurance policy.

Also you can add a disability insurance coverage to your mortgage protection insurance policy so that incase you get disabled your monthly mortgage payment will be paid with some exclusion on it.

A lot of people get confused with the different insurances out there. There is also what you call PMI which is Private Mortgage Insurance. This is not an insurance policy. This is from the lender, and base on your loan to value, they will charge you PMI, a premium to allow you to qualify for the mortgage loan if your loan to value is over 80 percent.
By James Clapton

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