YOU ASK:

What is mortgage protection insurance?

WE ANSWER:

Mortgage protection insurance is an insurance product that will help pay off your mortgage in the event that you are unable to pay it due to a covered cause.

Mortgage protection insurance, as the name suggests, is designed to protect your investment in your house. You have paid off several months in amortizations, as well as a substantial down payment, and you won't want to have these go down the drain and foreclose on your property in the event that you die, become disabled or lose your job.

These are the three kinds of protection being provided:

  • Mortgage life insurance - This pays for the balance of your mortgage or loan when you pass away.
  • Mortgage disability insurance - This pays for a specified number of months when you are disabled. There may be requirements where you will show proof of your disablement.
  • Mortgage unemployment insurance - This pays monthly amortizations up to a maximum number of months in the event that you are fired or laid off from your job.

Essentially, the mortgage protection insurance will kick in and pay the monthly amortizations over an agreed maximum payment period. During that time, the insured must show that his personal circumstances have not improved (i.e. he was able to get another job, or he has recovered from his disablement and can now engage in employment).

There are limits as to the monthly payments provided by the insurance - these will not exceed the full amount of one's lost monthly income. The insurance company will just peg a percentage of one's monthly income.

Mortgage protection insurance, while it is an excellent way to protect one's mortgage, may not be the best solution for everyone, particularly:

  • Those who are still under the probationary period in their employment
  • Those who are employed on a temporary basis
  • Those who voluntarily resigned from their employment
  • Those who were fired because of misconduct
  • Those with a pre-existing condition (this is normally defined as a condition where symptoms were seen and medical advice and treatment was sought in the past year)
  • Those whose disablement was self-inflicted or resulted from drug or alcohol abuse
  • Those who are minors or are above the required retirement age
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