What are the pros and cons of mortgage payment protection insurance?

Question

What are the pros and cons of mortgage payment protection insurance?

Answer 1

It costs a fortune and generally you will pay a lot of cash for something you do not use.  It may not cover the reason you can not pay the mortgage either.  If you have a job that may not be secure it may be  a good investment.

Answer 2

If you become ill they will pay your mortgage for you, that happened when my mum was off for 7 weeks with a broken arm.

I think something happens if u die as well but not sure.

However it's a lot of money to spend because you need to consider how likely it is that you will become unable to pay your mortgage.

You could contact an independent financial adviser, lots of banks and building societies have these.  They'll be the best people to talk to about your concerns.

Just ensure that you are comfortable and have read all the details of the contract before you sign.

Answer 3

Mortgage insurance is product specific which means if you are disabled or die it only pays for your mortgage.

You are better off to purchase a private disability policy that will pay you directly if you become ill or are in an accident and you decide where your  benefit goes. Don't always count on your employer-provided disability insurance.because you can always lose your job and with it your employer-provided disability insurance.

Also, purchase life insurance so that your family can pay off your mortgage in the event of your death.

Most likely the combination of the disability insurance and the life insurance will be less expense than the mortgage insurance but don't procrastinate. Be sure to take care of your insurance needs. Your best option is to work with a broker who represents a number of insurance companies rather than an agent who represents only one company because you are most likely to get the best deal. However, if you know an agent you are comfortable with and that will get you moving on the process go ahead and use the agent.

Answer 4

Waste of money.

If you are unfortunate enough to lose your job they won't pay your mortgage. Read the small print.

Answer 5

waste of money, you would be better off putting the cost of the insurance payment into a isa account and leave alone until you need it

Answer 6

The pros - if you lose your job, have an accident or become sick you will not have as much income coming in (if any), your house is then at risk of being repossed if you default on your mortgage repayments.  The insurance will take the worry away by meeting those repayments for up to a year (typical cover is 12 months).

Cons - it wont pay out if you already know you are going to lose your job or are suffering from some type of sickness (pre-existing medical condition).  The small print wont pay if you choose to leave your job or are sacked for poor performance.  You need to be off work for one month normally before the insurer will pay anything.

Life (death) cover is not included with MPPI as you are likely to have separate life insurance policies to finance the mortgage.

Is it worth it?  

Well you house if the most valuable asset you have so insurance that covers your mortgage has to be useful.  But do the maths, is the cost reasonable, as a percentage how much of your monthly repayments would the insurance cost?  Lots of comments here about it being expensive but you need to decide whether it offers value to you.

Answer 7

Coming from some one has been paying a few,  Altho I have never take out any insurance but I think Mort. Insurance years

ago had kind of had some meaning but today it's now like buy

ing a tele. & buy another garantt with the one that comes with tha tele. all I have done is to pay my Mortgages when the time

comes, that means every end of the months. That's It !!!.  So I told my Children the same thing. Just pay your Mortg. and moued on with your life !!!!!!!.  P.S.  The kind of insurance that

I am speaking  about is Mortgage ins. NOT THE INSURANCE ON THE HOUSE TO TAKE CARE OF IT IF ANY THING SHOULD HAPPENED TO IT.!!  That kind of insurance you should have it on your builng @ all times!!!!!!!.

Answer 8

This type of insurance is currently under scrutiny by the regulators as being not particularly good value for money.  Ask your lender how much of your premium they get as a commission and it's easy to see why.

If you decide you want the cover (it pays your mortgage repayments for a limited period and in limited circumstances if you are ill or made unemployed) shop around - don't just accept the cover that your lender pushes at you.

Also don't confuse the cover with mortgage protection cover which clears your mortgage if you die or suffer a critical illness.  This type of cover is much better value but again, shop around for the cover.

Answer 9

It depends on the plan you choose.

A good mortgage protection plan is going to cover several things.  First if you die, its will pay your mortgage off for you so your family wont have too. This portion of the plan is simply Term Life coverage usually either 15 or 30 year coverage to match the life of the mortgage. You want to probably make sure here that it level benefit and not a decreasing term, I never liked the idea of paying for something that gets smaller over time.

The second part of the coverage will be Disability coverage.  Here you want to have a TOTAL disability coverage that will cover you for both accidents and sickness. You’ll want to have a monthly benefit to match your mortgage payment or 65% of your income. Typically these policies have a 90 day elimination period, which means you will have to be out of work for 90 days before benefits kick in.  Also look at the benefit period, it should pay you anywhere from about 18 to 24 months that you are out of work.

The other things you'll see on a mortgage protection policy are just bells and whistles, but some of them are nice ones!  Two that I like are the return of premium, when the mortgage is done and coverage is no longer needed you get your money back that you paid into the policy. And an accelerated death benefit, if you become terminally ill the death benefit gets advanced to you before you die.

There are unemployment provisions, waiver of premiums, home owner provisions which basically wave the monthly premium for a given time if you ever find yourself in a situation where you need to use them.

Your best bet is to find a policy that rolls all of these into one coverage (1 policy) as you'll save money on policy fees.

Depending on your age and mortgage amount the premium can be typically anywhere from $20 a month to $200 a month.

The only con I can think of that you'd run into would be another monthly bill. So make sure you pick a plan that fits your budget as well as your need.