Mortgage Protection Insurance

2008-08-27 10:54:02

( Financial )



Mortgage Payments are Very Real Responsibilities

Many borrowers often have the misconception that when they get into a financial crisis, their lenders will take it easy on their mortgage payments.

But the reality is that your lender will still maintain the same strict policies and standards with your loan, in good times or bad. The length of the grace period before penalties set in depends on the lender's own set of policies, but most will charge you extra interest even for a few days' delay in payments. You will realize that while your lender has been patient with you during your loan application period, he will not hesitate to hold on to your property for dear life the minute you declare bankruptcy.

Another tragic misconception of borrowers is that in case they lose income due to disability or unemployment, they will be able to get financial support from the state or their pension funds. These funds will in no way be able to support you even for a couple of months, as you have other expenses and bills to take care of.

How Mortgage Protection Insurance Works

Mortgage protection insurance is made especially to cover your liabilities in case you lose your income opportunities. It works just like any insurance policy, in that you make regular premium payments either annually, quarterly or monthly. Your payments must be up to date to keep your mortgage protection insurance policy in force.

In the event that you lose your job, business or other source of income, you make the claim against your mortgage insurance cover. The insurer can either send you the payment funds, or can pay on your behalf directly to the lender.

A typical mortgage protection cover will pay for your existing mortgage including interest about a month after your claim. However, the same policy will pay only up to twelve months of your mortgage payments, as the insurer assumes that you will have found another job or will have recovered from illness by then.

Where to Get Mortgage Protection Plans

Many reputable insurance companies sell mortgage protection insurance policies. You can also buy policies through online sites of these insurance companies.
Your premium is calculated based on the size of your monthly mortgage payments. You may also want to include other monthly bills, such as utilities, in the mortgage insurance coverage.

While it is not required by law to purchase mortgage protection cover, many lenders do recommend that you get one especially in these times of employment instability.


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