YOU ASK:

Will my payment protection insurance fully pay my home loan in the event that I die?

WE ANSWER:

Yes, the payment protection insurance will fully pay the balance of your mortgage upon your death, if you are the insured.

This kind of payment protection insurance is designed to cover the amount being loaned. Thus, the insurance will usually start from the amount equal to the loan amount. There are some products that allow the decrease of the policy amount even as the mortgage becomes smaller as you pay for your mortgage.

The term of this insurance should be equal to the term of the mortgage. In other words, the policy will also terminate when the mortgage is terminated.

Aside from mortgage life insurance, you can also take out insurance that covers against disability and unemployment. There are also some mortgage protection plans that cover against the diagnosis of the insured of a critical illness where the insured is expected to die within a year of diagnosis. The difference is that for disability and unemployment, the insurance will not pay a lump sum. Instead, it will pay the monthly mortgages up to the specified maximum number of months.

The advantage of getting mortgage payment insurance is that you be more at peace, knowing that your investment on a home will not go to waste because of your unexpected death. You can protect the investment so that your heirs (your spouse and children) can still enjoy the place that you have provided for them as their home.

When you are thinking about getting payment protection insurance for your home loan, it is best to consider the following:

  • Are there any other breadwinners aside from you? Will his income be able to pay the monthly mortgage amortizations?
  • Will my spouse and children have any help from relatives to pay for the mortgage?
  • Do I have income protection from another source (employer-provided disability insurance, my own disability insurance policy?)
  • Do I have enough savings to cover the payments?

Your answers to these questions will help you decide whether you need home loan payment protection insurance.

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