When buying a home, there are many things that go into your mortgage. On your good faith estimate, you may see several types of insurance that you don't even know what are. Both you and your lender want you to keep your home. The lender does not want you to default, it cost money to foreclose. That is why they ask for so many different types of insurance. For example, if you put less than 20% down, you will be required to pay for private mortgage insurance. This insurance is purely for the lender, not for you. But one type of insurance that may be offered to you is mortgage insurance. This protects both the bank and your family. If you pass away, the insurance policy will pay off the remainder of your mortgage balance. Your family gets to keep the home and the bank gets its money. You may also be offered this insurance on your auto loans, secured loans, signature loans and credit cards. The same idea applies to all of these loans. In the case of your death, the policy pays off the debt. But you shouldn't just jump for this type of coverage. It depends on your situation. My parents had it on three of my father's credit cards. They did not have life insurance as my father was quite elderly and not in great health. Their credit cards were there only debt. When he passed, the insurance paid these cards. Yes, my mother probably paid the amount covered to the company in premiums, but it was a nice situation for her to have them all taken care of. She didn't have to dip into her savings. Personally, my husband and I have life insurance. We don't need mortgage insurance because we have adequate life insurance coverage to meet any future needs in the case of one of us passing. If you already have insurance coverage, you don't need to pay for dual coverage. If you don't already have life insurance, is mortgage insurance a good idea? Remember that the bank is a money lender, not an insurance provider. You are more likely to have better premiums and coverage through term life insurance than from the bank. Also, the premiums on your mortgage payment protection, also called MPP, remain the same throughout the life of your mortgage. But the balance of your mortgage is decreasing. You are paying the same for less coverage. Doesn't make a lot of sense. The most important thing to remember is that the mortgage insurance will only take care of your mortgage. If you pass on, there will still be other bills to be paid. It is a good idea to forgo the mortgage insurance and take out life insurance, if possible. If you aren't able to get life insurance due to various medical reasons, then by all means, protect your mortgage. |
