Tuesday, June 9, 2009

Should I Buy Mortgage Protection Insurance?

There are two types of mortgage insurance. With one, you might not have a choice as to whether you have it. Private mortgage insurance is insurance that will protect your lender should you default on your loan. If your down payment is less than 20 percent of your property’s value, you likely won’t have a choice about whether you have private mortgage insurance; it’s required. But with mortgage life insurance, you get to decide.

Private Mortgage Insurance

Private mortgage insurance is required in just about any circumstance in which more than 80 percent of the value of the home would be under a mortgage loan. Private mortgage insurance is there to protect the lender. The cost of private mortgage insurance is typically 0.5 percent of the amount of your loan.

Mortgage Life Insurance

Mortgage life insurance is a mortgage insurance that can protect you instead of your lender. This type of insurance covers the amount of your mortgage if you should die, obtain a disability, or acquire a debilitating illness.

In most cases it doesn’t make much sense to have mortgage life insurance. The chance that you will become unable to pay the mortgage is generally small. And if that happens, your family or the others in your household will have to find other ways to pay all the bills—not just your mortgage.

Instead, you may wish to consider disability insurance. Disability insurance would help you pay all your bills—not just your mortgage—should you become disabled. For about the same amount you’d pay to take care of your mortgage, you could pay an insurance premium to cover more of your expenses.

By C.L. Haehl

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