Mortgage Protection Insurance

In the event that an individual or a business with mortgage payment obligations can no longer pay the mortgage due to illness or death, then the lender forecloses on the property and resells it if the borrower fails to settle the required amount. In order to protect themselves from default risk and the possibility of foreclosure, the borrower can take out mortgage protection insurance also known as mortgage life insurance. In the event of temporary or permanent disability or even death of the borrower that is covered by a mortgage protection policy, they or their beneficiaries as the case may be, will receive a lump-sum payment from their insurer to settle the outstanding mortgage. In some cases, it can be an on-going benefit with regular payments being made rather than a lump-sum.

This is an important instrument for business owners that have borrowed money to purchase the premises from which they are operating their business or that have borrowed money to purchase their home. Both real estate assets can be protected with mortgage protection insurance. Claims for mortgage protection insurance can be triggered by an insurable event occurring which may be redundancy, critical illness or death depending on the provisions of the specific policy held. In some cases, mortgage protection policies are automatically required by the lender at the time that the mortgage is originated while in some cases they are optional.

Cost

Calculations of mortgage protection insurance premiums are based on several factors such as:

  1. The mortgage loan amount outstanding.
  2. The size of the loan repayments.
  3. The age and health of the policyholder.
  4. The income of the policyholder.
  5. The type of mortgage protection insurance policy held.
  6. Term of the policy.

Mortgage protection insurance costs vary depending on the Insurer and the variables referred to above. However, they typically range between $40 and $270. However, policies with more attractive benefits tend to be in the $150 plus range.

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