Mortgage Protection Insurance

mortgage protection insurance

What is Mortgage Protection Insurance?

Mortgage protection insurance is a type of life insurance policy that protects yourself and your loved ones from your mortgage obligation, it often comes with critical illness insurance and mortgage disability insurance riders.

A mortgage protection insurance is also called a mortgage protection life insurance and is often confused with the more popular, CMHC mortgage loan insurance when a home buyer only makes a 5% downpayment toward the purchase of their home.

How Does Mortgage Life Insurance Work

A mortgage protection insurance will help you and your loved ones afford your mortgage payments in the event that the “mortgagor” or the person who is financially liable to the mortgage lender becomes ill, disabled, or die.

The life insurance and critical illness insurance coverages of a mortgage protection insurance would pay a lump sum for the amount of coverage while the mortgage disability insurance rider pays a monthly benefit that the family can use toward the payment of one’s monthly mortgage obligation.

A mortgage protection insurance’s sole purpose is to help your loved ones keep your home in the event of an unfortunate event that the family income is ever affected by an unexpected life event.

Is Mortgage Protection the Same as life insurance

 

Depending on your chosen coverage, in many instances, it is but a well-planned mortgage protection insurance will not only cover your family from your mortgage payments in the event of death but ideally should also secure them in the event of a disability or a critical illness.

If budget is a concern, some people may only choose to protect their family from losing their home only if in case they die during the term of their mortgage but ideally, a person who is financially liable to the mortgage lender should have a well-rounded mortgage protection insurance that protects themselves and their loved ones against losing the risk of not being able to make their mortgage payments in case of a disability, critical illness or death.

Does Mortgage Insurance Cover Disability

This depends on the type of mortgage insurance that you’re going to implement (or have implemented); I strongly suggest including a mortgage disability insurance as a rider in any mortgage protection life insurance policy that you’re going to implement and if possible, throw in a critical illness insurance coverage rider as well.

If on the other hand, you’ve only implemented a mortgage protection life insurance and you didn’t have any critical illness or mortgage disability insurance riders, your policy will only payout in the event of the life insured’s death.

Life Insurance vs Mortgage Life Insurance

A mortgage life insurance is technically life insurance, and there are many different types of life insurance that protect you and your loved ones from different financial risks that may result from a serious yet unexpected life event.

A well-planned life insurance policy takes into consideration all these risks: ideally, your loved ones’ financial security should be protected at least against all your basic life obligations such as:

  1. Debts
  2. Loss or reduced income
  3. Mortgage
  4. Kids’ Education
  5. Final Expenses (Death and Taxes at Death)

Whole life insurance offer a more general type of (life) insurance protection, a mortgage life insurance protects your loved ones, specifically, from your mortgage obligation; thereby securing them from losing your home.

Most people in Winnipeg have a life insurance coverage of between $150,000.00 and $250,000.00. In most instances, these amounts aren’t really enough to secure a young family’s lifestyle and future, moreover, protect them from losing their home.

Of course, if your mortgage balance is only between $150,000.00 to $250,000.00; you may be thinking that these amounts are just right to protect your loved ones from your mortgage obligations but we have to keep in mind that we have more obligations to our family than securing their shelter. Not to mention the fact that there will be immediate cash needs that arise when a family member passes away.

That’s why it is important to have separate mortgage insurance protection is placed on top of your existing life insurance coverage which you may have implemented to serve an entirely different purpose.

This is where a proper insurance financial needs analysis comes into play, so you know exactly what you and your loved ones’ financial protection needs are. 

A financial needs analysis will help us determine what you have that needs protecting, one of which is a mortgage loan obligation.

Do I need a Mortgage Protection Insurance?

mortgage protection insurance

Most homebuyers know that they need and that they are required by their mortgage lenders to secure a home or property insurance to secure their mortgage loans but most people aren’t really sure if they need a mortgage protection insurance. 

This comes from the idea that it is not required and sadly, we’ve heard some clients say that their mortgage specialist told them it isn’t really required.

A home or property insurance is required by a lender to protect their investment should the property catches fire with an added benefit to the homebuyer of protecting their valuables against theft or fire.

A mortgage protection insurance, on the other hand, is your loved ones’ protection; so as they don’t lose their home should one of the breadwinners passes away unexpectedly.

Most of the time, both husband and wife are contracted in a mortgage agreement. Guess what happens if one of the parties under the contract passes away?

The remaining party should be able to still afford to service the debt, otherwise, their family home can be foreclosed.

So to answer the question: “Do I need a mortgage protection insurance?”

In most instances, you do not unless if your present life insurance policy already covers your loved ones from your mortgage obligation.

As I mentioned above, a solid mortgage protection insurance protects you and your loved ones from losing your home in any of the following serious life events:

  1. Disability
  2. Critical Illness
  3. Death

If your current life insurance or mortgage protection life insurance doesn’t have the necessary protection, then you and your loved ones aren’t fully protected against your mortgage obligation.

Having a separate mortgage protection insurance ensures that you and your loved ones would still afford to pay off or servicing your mortgage obligation even if you find yourself in the worst life event of losing someone dear.

For many people, their homes may be the biggest purchase of their lives and it may be for you as well!

And if you’re like many of us, you will probably need to get a mortgage loan to afford this purchase.

With such a huge loan, comes a very huge financial obligation and it’s nothing but smart that you protect your family from this financial risk.

Book your free initial consultation with us and we’ll help you zero-out on a plan that best suits your needs.

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