If you’ve recently paid off your mortgage you might have noticed that you’ve been getting letters or even emails suggesting that you take out something called Mortgage Protection Insurance. To some, these can actually be quite scary solicitations as they will claim to have lots of personal information and they can use frightening statements, designed to really intimidate and cause panic and anxiety in the reader, like:
“Supposing you die suddenly? How would your family cope financially?”
They might suggest you buy into a mortgage protection insurance program to safeguard their future and give you “peace of mind and security”.
However, if you do your research thoroughly and properly and look into this some more, you’ll actually find out that Mortgage Protection Insurance is actually just another form of life insurance and for many is an unnecessary and impractical expense which they do not need to fork out for. That said, there are some people who it may possibly benefit – but here are the pertinent facts you need to know, to decide for yourself:
Higher Costs Associated With Them
Unlike other types of insurance it is more difficult to get quotes online for mortgage protection insurance and if you’re a healthy person who have, for instance, never smoked, you’ll find that if you do decide to go ahead and take out a policy, you’ll be charged more.
Premiums on these kinds of policies can be fixed, but only for five years and they still might end up costing you more in the long run. In contrast, if you took out life insurance – that would stay the same, with no hidden charges or nasty surprises – for thirty years.
You Might Be Declined A Pay-Out
Even though you keep up repayments on your mortgage protection insurance program and the premiums stay the same for a fixed term, you might still find out that over time the actual amount you can have paid out to you goes down, so in the long run, it makes it a poor financial investment.
You Might Get Inflation Eroded Premiums
After a certain amount of time, say between fifteen and thirty years when your mortgage is paid off and you get your premiums back, they won’t be worth anywhere near as much because of inflation.
There Is No Flexibility
If you have life insurance and die, your next of kin or heirs will directly benefit. If you have a mortgage protection insurance policy what will happen is that any pay outs will be sent directly from your insurer to your lender and there might be very little left over for your loved ones.
There Are Upper Age Limits
If you are aged 60 years or over then you might not be able to get mortgage protection insurance at all, or you may only be able to get it for a 15 year policy. You’ll otherwise need to be 45 or younger to get it at a full term.
Is There Anyone Out There Who This Type Of Policy Might Suit?
There are some people who mortgage protection insurance might suit. If you’re in poor health or have a current ongoing serious medical situation, you might benefit from it. It is useful for anyone for whom a medical might rule them out of life insurance. However, you must make sure that if you’re going to go ahead with it that you get yourself several good quotes from reputable agencies and shop around for the best deal for yourself and your family.
Please remember, this type of policy is not the same as private mortgage insurance, which only serves to protect the lender and not the borrower.
There will be certain companies that try and give you a very hard sell on this type of policy and try to convince you that you do need it in conjunction with your existing life insurance policy. Try to not listen to these claims – you do not. If you don’t think you have enough life insurance it pays to buy more of that rather than investing in something else. This type of cover will pay more to your loved ones in the event you die suddenly and want to see them provided for.
If you want to make sure that your family are looked after then it is simply better to stick to life insurance and a mortgage protection insurance policy, unless, for whatever reason you do not qualify for life insurance because of a serious, existing health condition. For the most part no-one should consider mortgage protection insurance, unless as a last resort after looking into every other avenue has failed to turn up anything that will help you out of your financial situation or there isn’t any other way of planning for the future and what lies ahead.